2023 Was the Least Affordable Year Ever for Homebuyers

Things can only get better in 2024 when it comes to housing affordability.

Consider that the average monthly new home payment has risen from $1,787 to $3,322 since 2020, according to an analysis from The Wall Street Journal.

On top of that, a record-low percentage of homes were affordable in 2023 (15.5%), according to Redfin. That’s down from a then-record 20.7% in 2022 and more than 40% before the pandemic homebuying boom.

Redfin, however, suggested in a report last week that housing affordability has already started to improve, and it expects it to continue improving in 2024.

“Many of the factors that made 2023 the least affordable year for homebuying on record are easing,” Redfin Senior Economist Elijah de la Campa said in prepared remarks.

“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. We’ll likely see a jump in home purchases in the new year as buyers take advantage of lower mortgage rates and more listings after the holidays.”

Still, it is hard to get past the fact that the number of affordable homes for sale fell to the lowest level on record this year. The 352,500 affordable listings were down 40.9% from 596,135 in 2022 and down from over 1 million per year during the prior decade.

“While the decline is partly due to a drop in listings in general—listings overall fell 21.2% year over year—it’s also because elevated mortgage rates and stubbornly high prices made the listings hitting the market more expensive,” Redfin said.

“Many homeowners are staying put instead of selling because they don’t want to lose their ultra-low interest rates,” Redfin said. “That’s bolstering home prices because it means buyers are competing for a limited pool of homes.

Black and Hispanic households have been affected more in the past few years than White households.

Only 6.9% of homes for sale in 2023 were affordable for the typical Black household, compared with 21.6% for the typical white household. The share was nearly as low for Hispanic/Latino households (10.4%) and was highest for Asian households (27.4%).

Redfin said that traditionally more affordable markets such as Kansas City; Greenville, S.C., and Worcester, Mass.; were less affordable this year.

In Kansas City, 27.9% of homes for sale in 2023 were affordable for the typical local household, down from 42.8% in 2022. Greenville fell 14.1 ppts and Worcester declined by 13.7 ppts. Cincinnati and Little Rock also dropped by double-digits, comparatively.