In a recently released report, real estate company Redfin revealed that 2023 stood out as the least affordable year for homebuying in at least the past 11 years.
The study, released Thursday, showcased California metro regions as the least affordable areas, while Midwest metros emerged as the most affordable, CNBC reported.
According to Redfin's findings, someone with the median income in the U.S., amounting to $78,642, would have had to allocate more than 40% of their income to monthly housing costs for a median-priced home, valued at around $400,000. This percentage represents the highest share in Redfin's records, which date back to 2012, and reflects a nearly 3% increase from last year.
Highlighting the disparity, Redfin reported that monthly costs for homebuyers surged more than twice as fast as wages. The 30-year fixed mortgage rate reached 8% in October, a milestone not seen since 2000 and coinciding with a decline in available housing listings.
Austin, Texas, bucked the overall trend, becoming the only city that saw increased affordability in 2023, with a decrease of around 1% in housing costs. By contrast, metros in California, including Anaheim, San Francisco, and San Jose, remained among the most expensive, and saw an uptick in the number of renters due to exorbitant housing costs.
Redfin's analysis indicated that a typical homebuyer in 2023 needed an income of at least $109,868 to keep monthly housing payments to 30% of their income for a median-priced home. This figure marked an 8.5% increase from the previous year, surpassing the typical household income by $30,000.
Meanwhile, Midwest metros, particularly Detroit, emerged as some of the most affordable areas, with median-income residents spending only about 18% of their earnings on monthly housing costs.
As the year draws to a close, Redfin offered a glimpse into 2024, predicting a potential improvement in affordability. The company anticipates a decrease in mortgage rates to approximately 6.6% and a 1% drop in home prices as new listings become available.
Redfin Senior Economist Elijah de la Campa provided insight into the challenges faced in 2023, stating, "A perfect storm of inflation, high prices, soaring mortgage rates, and low housing supply caused 2023 to go down as the least affordable year for housing in recent history." Despite this, de la Campa expressed optimism, noting that affordability already shows signs of improvement as the new year approaches.
Jim Thomas ✉
Jim Thomas is a writer based in Indiana. He holds a bachelor's degree in Political Science, a law degree from U.I.C. Law School, and has practiced law for more than 20 years.
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