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Low-Income Earners Feeling The Pain Of Homebuying

May 06, 2024
hammer affordability
Associate Editor

Redfin report shows low-income earners represented just 20.6% of all mortgages in 2023

The challenge of housing affordability is taking its toll on low-income Americans, according to a new report from Redfin.

Home mortgages taken out by low-income earners peaked at the start of the pandemic, reaching 23.2% of all loans in 2020. That share dropped down to 20.6% in 2023, the lowest since 2018, Redfin reported.

“There was a sweet spot in 2020 when mortgage rates were ultra low and home prices had yet to skyrocket, allowing some lower-income Americans to break into the housing market,” said Redfin Senior Economist Elijah de la Campa. “But somewhat ironically, the continued strength of the economy has made it harder to afford a home and widened the real-estate wealth gap between rich and poor Americans. The Fed’s interest-rate hikes, meant to help cool inflation and slow a hot economy, have pushed mortgage rates to near their highest level in more than two decades. That’s on top of home prices, which skyrocketed during the pandemic buying-boom and have stayed high due to a shortage of homes for sale.” 

High home prices and elevated mortgage rates have particularly impacted those in the very low-income category, who represented just 6% of mortgages last year, down from 7.7% in 2020.

Higher-income homebuyers have gained better traction in this game of affordability, taking up nearly half (44.8%) of all mortgages in 2023, similar to their 2018 share. 

Home prices and mortgage rates have not eased much in 2024. 

The median-home sale price on May 6 was around $420,000, up 5% year-over-year, but up nearly 40% since March 2020 and nearly 50% since March 2019.

The 30-year mortgage rate is around 7.2%, up from 6.43% a year ago, and more than double the record-low of 2.65% in 2021. 

The typical homebuyer’s monthly payment is now a record-high $2,886, up 13% year over year. Down payments have also felt the pressure, up to $84,000 for a buyer putting 20% down, from $80,200 a year ago, $60,800 in March 2020 and $56,800 in March 2019.

The numbers reveal that no one is immune to these challenges, as people of all income levels purchased far fewer homes in 2023 than the year prior.

The number of U.S. homes purchased fell 19% YOY for high-income earners, 18% for moderate earners, 22% for low-income earners and 31% for very-low-income earners.

About the author
Associate Editor
Erica Drzewiecki is an associate editor at NMP.
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