Just 15.5 percent of homes for sale in 2023 were affordable for the typical U.S. household — the lowest share on record, according to Redfin.
That’s down from 20.7 percent in 2022 and more than 40 percent before the pandemic homebuying boom.
The number of affordable homes for sale also dropped to the lowest level on Redfin’s records. There were 352,500 affordable listings in 2023, down 40.9 percent from 596,135 in 2022 and down from over a million per year during the prior decade. While the decline is partly due to a drop in listings in general — listings overall fell 21.2 percent year-over-year — it’s also due to elevated mortgage rates and stubbornly high prices making listings hitting the market more expensive, according to Redfin.
Mortgage rates have fallen from their October peak but remain higher than they were in 2022; the typical homebuyer’s monthly payment is roughly $250 more than it was a year ago. Elevated mortgage rates have also propped up housing costs by limiting supply. Many homeowners are staying put instead of selling because they don’t want to lose their ultra-low interest rate. That’s bolstering home prices because it means buyers are competing for a limited pool of homes.
The good news is that housing affordability has already started to improve, and Redfin expects it to continue improving in 2024.
“Many of the factors that made 2023 the least affordable year for homebuying on record are easing,” Redfin Senior Economist Elijah de la Campa said in a release. “Mortgage rates are under 7 percent for the first time in months, home price growth is slowing as lower rates prompt more people to list their homes, and overall inflation continues to cool. We’ll likely see a jump in home purchases in the new year as buyers take advantage of lower mortgage rates and more listings after the holidays.”
Only 6.9 percent of homes for sale in 2023 were affordable for the typical Black household, compared with 21.6 percent for the typical white household. The share was nearly as low for Hispanic/Latino households (10.4 percent) and was highest for Asian households (27.4 percent).
Housing has become unaffordable for a lot of Americans, but Black and Hispanic/Latino families have been hit especially hard because they’re often less wealthy to begin with, Redfin said. On average, these groups earn less money, have less generational wealth, and have lower credit scores (and sometimes no credit scores at all) than white Americans due to decades of discrimination. That makes it tougher to afford a down payment and qualify for a low mortgage rate. Black Americans, in particular, also frequently face racial bias during the homebuying process, Redfin added.
The racial housing affordability gap exists nationwide, from the least affordable metros to the most affordable metros.
In Detroit, which has the lowest mortgage payments in the country, 31.8 percent of listings were affordable for the typical Black household this year and 50.2 percent were affordable for the typical Hispanic/Latino household, but that’s much lower than the 66 percent affordable for the typical white household.
In Anaheim, Calif., one of the most expensive markets in the country, people across the board have a hard time finding affordable housing. Still, Black and Hispanic/Latino house hunters have fewer options. Less than 0.5 percent of listings were affordable for the typical Black household and the typical Hispanic/Latino household in 2023, compared with 1.8 percent for the typical white household.
It’s worth noting that wages have grown faster for nonwhite households than for white households this year, helping to shrink the income gap. Rents have also started to fall, which disproportionately impacts communities of color because they’re more likely to be renters.
In Kansas City, 27.9 percent of homes for sale in 2023 were affordable for the typical local household, down from 42.8 percent in 2022. That 14.8 percentage point decline is the largest among the metros Redfin analyzed. Next came Greenville, S.C. (-14.1 ppts), Worcester, Mass. (-13.7 ppts), Cincinnati (-13.7 ppts) and Little Rock, Ark. (-13.5 ppts).
Relatively inexpensive metros have seen affordability erode quickly because housing costs have more room to rise, and local incomes are often climbing at a fraction of the pace that mortgage payments are.
In San Francisco, 0.3 percent of homes for sale in 2023 were affordable for the typical local household, down from 0.4 percent in 2022. That’s the smallest decline among the metros Redfin analyzed. Next came Detroit (-0.2 ppts), Los Angeles (-0.2 ppts) Boise, Idaho, (-0.3 ppts) and Oakland, Calif. (-0.5 ppts).
Markets that have long been expensive like San Francisco, Oakland and Los Angeles already had so few affordable homes that the share didn’t have much room to fall.
In the five aforementioned metros aside from Detroit, less than 5 percent of listings were affordable for the typical household in 2023.