Buying a home for many people has never been less affordable, according to a report by real estate company Redfin published Thursday.
A median income earner would need to spend 41% of their earnings on monthly housing costs if they’d bought a median-priced home, per Redfin’s analysis.
That’s close to double the level in 2012, when Redfin started collecting data, and a big jump from 31% just two years ago.
Redfin’s analysis calculated monthly housing payments using median home prices, average mortgage rates of 6.73%, and median incomes, considering a 20% down payment.
Housing affordability has worsened largely because wages have failed to keep pace with the rising cost of buying a home.
While housing affordability plummeted in nearly all of the 50 largest metropolitan areas, one city emerged as a notable exception.
In Austin, a homebuyer with a median local income would spend just 36.6% of their earnings on a median-priced home. That marks a 1% decline from last year.
However, it’s still not the most affordable market – that title is shared by Detroit and Pittsburgh, according to Redfin. In both cities, homebuyers with typical local income can expect to spend less than 25% of their monthly pay on housing costs.
In contrast, the least affordable markets were Anaheim and San Francisco, where homebuyers with the typical local income would spend more than 80% of their pay on monthly housing costs.
Mortgage rates hit a 23-year high in Octover when the 30-year fixed rate reached 7.92%. Data from the National Association of Realtors also found that housing affordability had reached new lows not seen since 1985.
The average monthly payment for a standard starter home, with a 10% down payment, rose 6.9% from the previous quarter and a 19% year-on-year, per the NAR.
However, the outlook isn’t entirely bleak. Redfin’s chief economist Daryl Fairweather told Business Insider this week: “We’re starting to see a shift toward a buyer’s market as pandemic-driven inflation takes its last gasps, mortgage rates come down, and more people list their homes for sale.”
Redfin predicted a dip in the average 30-year fixed mortgage rate to about 6.6% by the end of 2024.