About a fifth of US homes for sale last year were affordable for the typical household, with half the number of affordable homes for sale this year compared to last year.
According to a report by tech-driven real estate firm Redfin, the percentage of homes for sale that were affordable for the typical household in 2022 is down from two out of five in 2021 and the lowest percentage on record.
A Friday release said a listing is considered affordable if the estimated monthly mortgage payment is no more than 30% of the local county’s median income.
The number of affordable listings in 2022 fell 53% year over year, marking the largest annual decline in Redfin’s records.
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While new listings were down 10% year over year, Redfin says that’s largely due to the fact that higher mortgage rates made the listings that came out less affordable.
It identified three main reasons for the deepening housing affordability crisis.
Mortgage rates have more than doubled from an all-time low of 2.65% in 2021, the property-buying boom of the COVID-19 pandemic pushed up home prices and there were fewer new home listings in January than any month on record , apart from April 2020 .
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The report also revealed that white households can afford three times more housing than black households, and affordable housing has fallen the most in pandemic boomtowns and expensive coastal cities.
In the 100 most populous metropolitan areas, all less affordable housing was for sale in 2022 than in 2021.
“Housing affordability is at its lowest level on record, which will widen the wealth gap – particularly among millennials,” said Taylor Marr, Redfin’s deputy chief economist, in a statement. “Many millennials were able to buy their first home before or during the pandemic home-buying boom, but many others were stripped of the homeownership price and forced to continue renting. That means many young adults have missed a key wealth-building opportunity: the value of homes owned by millennials has risen nearly 30% over the past year.”
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Redfin noted that the Biden administration has announced it will lower mortgage insurance rates for homebuyers who take out loans secured by the Federal Housing Administration.
“The good news is that housing affordability should improve. Mortgage rates will eventually come down as the Fed makes progress on controlling inflation, and home prices have already started falling. Incomes are also growing faster than the historical norm,” Marr said.