Housing affordability plunged this year to the lowest level on record amid an astronomical rise in mortgage rates, putting ownership out of reach for millions of Americans, according to a new report published by Redfin.
Only 15.5% of homes for sale in 2023 are considered affordable for the typical US household, the lowest level on record since Redfin began tracking the data in 2013. It marks a sharp decline from the typical 40% seen before the COVID-19 pandemic home-buying boom began , and a figure of 20.7% was recorded in 2022.
This decline in affordability is partly due to a decline in listings – which fell 21.2% over the year – but is largely the result of a spike in mortgage rates and subsequent increases in home prices this year.
Combined, the two have helped to push the typical share of average wages across the country required for major home ownership expenses up to 35%, according to a separate report published by property data provider ATTOM.
An aggressive interest rate hike campaign by the Federal Reserve sent mortgage rates soaring above 7% for the first time in nearly two decades last year. Rates hit a new 23-year high in October, although they have begun to slowly retreat since then as many investors believe the Fed is done raising interest rates.
In 2023, less than 20% of homes will be considered affordable. AP
The average rate for a 30-year fixed loan fell to 6.67% this week, Freddie Mac reported, but that was still well above the 6.27% rate set a year ago and a pandemic-era low of 3%. The typical monthly mortgage payment costs about $250 more than a year ago, according to a Redfin report.
Although mortgage rates have more than doubled compared to three years ago, home prices have barely budged.
This is largely due to the lack of homes available for sale. Sellers who locked in low mortgage rates before the pandemic began have refused to sell, leaving few options for interested prospective buyers.
The number of homes available on the market at the end of November was down more than 4% from the same time last year and down an astonishing 34% from the normal number before the pandemic began in early 2020, according to the latest report from Realtor.com.
The good news, however, is that housing affordability is finally starting to improve – and could continue to improve in 2024.
“Many of the factors that made 2023 the cheapest year to buy a home on record are diminishing,” said Elijah de la Campa, senior economist at Redfin. “Mortgage rates are below 7% for the first time in months, home price growth is slowing as lower rates encourage more people to list their homes, and overall inflation continues to moderate.”
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Source: thtrangdai.edu.vn/en/
