A new fourth-quarter report from ATTOM shows that home affordability continues to be a challenge with median-priced single-family homes and condos continuing to be less affordable. Another separate report from Redfin says the number of affordable homes for sale dropped to the lowest level on record this year.
This trend, ongoing since 2021, indicates that home ownership is still requiring historically large portions of wages across the nation.
According to ATTOM's 2023 U.S. Home Affordability Report, major expenses on median-priced homes now consume 33.7% of the average national wage, exceeding the 28% affordability threshold set by lenders. This marks the highest expense-to-wage ratio since 2007, underscoring the financial stretch home ownership has become for many Americans.
"The good news is that home affordability has stopped getting tougher around the U.S., at least for the moment. The bad news is that owning a home remains more of a financial stretch than it's been for many years," said Rob Barber, CEO for ATTOM. "The annual fall slowdown in the housing market clearly has helped stem the tide working against potential purchasers. Whether that's just a temporary thing tied to seasonal market patterns is something we won't know until next year, especially given recent signs that interest rates are coming down."
The report comes amidst fluctuating patterns in home prices and mortgage interest rates. The fourth quarter saw a slight increase in average 30-year fixed mortgage rates from 7.1% to 7.4%, while median home values dipped almost 3%. These factors have contributed to maintaining the status quo in home ownership expenses, preventing them from becoming even more unaffordable.
The Redfin report found there were 352,500 affordable listings in 2023, down 40.9% from 596,135 in 2022 and down from over a million per year during the prior decade.
“Many of the factors that made 2023 the least affordable year for homebuying on record are easing,” said Redfin Senior Economist Elijah de la Campa. “Mortgage rates are under 7% for the first time in months, home price growth is slowing as lower rates prompt more people to list their homes, and overall inflation continues to cool.
ATTOM found that nationally, median home prices fell from $344,670 in the third quarter to $335,000 in the fourth quarter. However, it is still a 6% increase from the fourth quarter of 2022. Among counties with populations over one million, significant year-over-year price increases were observed in regions like Orange County, CA, and Fulton County, GA, while places like New York County (Manhattan), NY, and Travis County (Austin), TX, saw notable declines.
With the expense-to-wage ratio still high, the report suggests that home ownership remains a significant financial burden for average workers, especially in markets where major expenses exceed 43% of local wages. The most impacted areas are predominantly located on the Northeast and West Coasts, with regions like Brooklyn, NY, and Santa Cruz, CA, leading the pack.
The ATTOM report notes that annual wages exceeding $75,000 are required to afford median-priced homes in 57.2% of the analyzed markets. This requirement is significantly higher than the national average wage, emphasizing the affordability gap.
As the market heads into winter, a combination of potential price declines and recent interest rate decreases may offer some relief for homebuyers. However, the overall affordability remains a significant challenge, with 98.6% of markets being less affordable than their historical averages.
Redfin says that in 2023, only a small fraction of homes for sale were within the financial reach of typical black (6.9%) and Hispanic/Latino (10.4%) households, starkly contrasting with the higher affordability for white (21.6%) and Asian (27.4%) households. This disparity underscores the broader issue of housing affordability in the United States, disproportionately affecting black and Hispanic/Latino families.
The disparity in housing affordability across racial lines is evident nationwide, affecting both the least and most affordable housing markets.
Redfin says in Detroit, known for its low mortgage payments, 31.8% of homes were within reach for an average black household, and 50.2% were affordable for Hispanic/Latino households. These figures fall significantly short of the 66% affordability rate for white households. Conversely, in Anaheim, CA, one of the priciest markets, all demographics struggle to find affordable housing, but the challenge is even more pronounced for black and Hispanic/Latino home seekers. In 2023, fewer than 0.5% of homes were affordable for these groups, compared to 1.8% for white households.
