The past calendar year has been the least affordable year on record to buy a home, according to Redfin data.
An individual making the median U.S. income of $78,642 in 2023 would have had to spend 41.4% of their earnings on monthly housing costs if they bought a $408,806 median-priced U.S. home. The income share is the highest on record dating back to 2012, up from 38.7% in 2022.
The typical 2023 buyer needed to earn an annual income of at least $109,868 if they wanted to spend no more than 30% earnings on monthly housing payments. In 2023, the median monthly housing payment for buyers was $2,175, up 12.6% from 2022. Over the same period, the median household income rose just 5.2%.
“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,” says Redfin senior economist Elijah de la Campa. “The good news is that affordability is already improving heading into the new year. Mortgage rates are coming down, more people are listing homes for sale, and there are still plenty of sidelined buyers ready to take a bite of fresh inventory. We expect these conditions to improve in 2024.”
On a local level, Austin, Texas, was the lone metro among the 50 most populous MSAs that became more affordable in 2023, according to Redfin. In Austin, someone making the $99,523 median income in 2023 would have had to spend 36.6% of their earnings on monthly housing costs, down from 37.7% in 2022.
Detroit (+0.7 percentage points to 18.5%), Oakland, California (+0.7 percentage points to 53.3%), Phoenix (+0.9 percentage points to 40.2%), and Las Vegas (+1.2 percentage points to 43.8%) posted the smallest increases on a year-over-year basis in terms of affordability.
In Anaheim, California, someone making the $92,306 median income in 2023 would have had to spend 88.3% of their earnings on monthly housing costs if they bought a median-priced home in the area ($1,022,075), up from 80.2% in 2022. California is home to several other unaffordable metros, including San Francisco, San Jose, Los Angeles, and San Diego. Miami (+7.1 percentage points to 54.1%), West Palm Beach, Florida (+6.2 percentage points to 49.1%), San Diego (+5.9 percentage points to 64.6%), and Newark, New Jersey (+5.6 percentage points to 42.8%) posted the largest yearly jumps in terms of worsening affordability.
Redfin says the outlook for affordability in 2024 is more optimistic because housing costs have started to decline and mortgage rates have begun to fall. For the four weeks ending Nov. 26, the typical monthly payment for a home buyer was $2,757, down from its peak. Redfin projects listings will climb further in 2024, prices will drop 1%, and mortgage rates will fall to about 6.6%.
