BAM Key Details: 

  • A new Redfin report shows just 16% of homes listed in 2023 were affordable for the typical homebuyer, based on affordability standards and local median household income. 
  • That share is the lowest on record and likely the bottom for housing affordability—down from 21% in 2022 and more than 40% below pre-pandemic levels. 
  • The number of affordable homes in 2023 also reached the lowest on record. 
  • Redfin economists expect housing affordability to improve in 2024 as mortgage rates drop and more homes hit the market. 

It’s not exactly front-page news that 2023 was a year of record-low housing affordability. But it still helps to put a number to the actual share of listed homes that were affordable to the typical U.S. homebuyer. It helps even more to know that the worst of it is most likely behind us. 

According to the latest report from Redfin, that share is 15.5%, down from 20.7% in 2022 and more than 40% below pre-pandemic levels. 

That 15.5% is the lowest share on record and likely the lowest we’ll see for some time as housing economists forecast improved affordability in 2024 due to falling mortgage rates and more homes going on the market. 

The number of affordable homes also hit bottom in 2023, down nearly 41% from 2022. 

It’s also worth pointing out here that the 15.5% share is the average. Broken down by race, housing affordability was three times worse for Black households compared to white ones. 

Redfin-16-pct-of-homes-affordable-to-typical-homebuyer-in-2023

Source: Redfin

Data for Redfin’s report is based on their analysis of new listings in 97 of the most heavily populated U.S. metro areas. 

For the purposes of the report, a home is considered affordable if the estimated monthly mortgage payment does not exceed 30% of the median household income for the local county. 

The national share of affordable homes was calculated by dividing the sum of affordable listings in the metros analyzed by the sum total of listings in those metros. Data for the 2023 housing market goes through November while data for previous years span the full 12 months. 

Redfin’s records go back to 2013. 

Redfin data highlights racial disparity in housing affordability

As bad as that 15.5% average looks, it doesn’t tell the whole story. 

Of all the homes listed in the U.S. in 2023, only 6.9% were affordable for the typical Black household—roughly one-third of the 21.6% affordable for the typical white household. 

The share of affordable homes was nearly as low for Hispanic/Latino households at 10.4%. It was highest for Asian households at 27.4%. 

Housing affordability in 2024 has been rough for a lot of Americans, but it’s had an outsized impact on Black and Hispanic/Latino families because, on average, these groups have less generational wealth, earn less money, and have lower (or nonexistent) credit scores compared to white Americans, largely due to decades of discrimination. 

Those three factors make it more difficult for Black and Hispanic/Latino Americans to afford a down payment or qualify for a low mortgage rate. Black Americans, in particular, often face racial bias if not outright discrimination during the homebuying process. 

Redfin-7-pct-of-listings-affordable-for-typical-Black-household-2023

Source: Redfin

The racial housing affordability gap is not isolated to a handful of markets or to specific regions. It exists across the U.S., from the least affordable markets to the most. 

Detroit, for example, has the lowest mortgage payments in the country. Nearly a third (31.8%) of its listed homes were affordable for the typical Black homebuyer in 2023, and over half (50.2%) were affordable for the typical Hispanic/Latino buyer. But that’s still well below the 66% of listings that were affordable for the typical white household. 

On the flipside, in one of the most expensive markets in the U.S., Anaheim, CA, folks across the board had a difficult time finding affordable homes. But Black and Hispanic/Latino home shoppers had fewer options compared to their white counterparts. 

Less than 0.5% of listed homes were affordable for the typical Black or Hispanic/Latino homebuyer, compared to the 1.8% of listings that were affordable for the typical white buyer. 

The news isn’t all bad, though. Wage growth in 2023 was faster for nonwhite households than for white ones, helping to shrink the racial income gap. 

Rents have also started to decline across the U.S., thanks to the increase in multifamily units becoming available, which disproportionately impacts households of color, who are more likely to be renters. 

Relatively affordable markets became much less affordable in 2023

Record-low affordability wasn’t limited to the most expensive markets, either. Relatively affordable metros in the South and Midwest also became far less affordable in 2023. 

In Kansas City, just 27.9% of homes listed in 2023 were affordable for the typical home shopper in the area—down from 42.8% the year before. That 14.8 percentage point (ppt) drop is the largest of all the metros in Redfin’s analysis. 

Five metros with the largest year-over-year declines in affordability in 2023: 

  1. Kansas City, MO (-14.8 percentage points; from 42.8% in 2022 to 27.9% in 2023)
  2. Greenville, SC (-14.1 ppts; from 33.4% in 2022 to 21.5% in 2023)
  3. Worcester, MA (-13.7 ppts; from 21.2% in 2022 to 7.6% in 2023)
  4. Cincinnati (-13.7 ppts; from 48.5% in 2022 to 34.8% in 2023)
  5. Little Rock, AR (-13.5 ppts; from 44.6% in 2022 to 31.2% in 2023)

Generally speaking, housing costs in relatively affordable metros have more room to rise compared to metros known for their high price point. It doesn’t help, either, that local incomes grew at a much slower pace compared to monthly mortgage payments. 

Meanwhile, in pricier metros, the difference in affordability from 2022 to 2023 was less noticeable. 

In San Francisco, 0.3% of homes listed in 2023 were affordable for the typical local home shopper—down from 0.4% in 2022, marking the smallest annual decline of all the metros in Redfin’s analysis. 

Five metros with the smallest year-over-year declines in affordability: 

  1. San Francisco, CA (-0.1 percentage points; from 0.4% in 2022 to 0.3% in 2023)
  2. Detroit (-0.2 ppts; from 51.6% in 2022 to 51.4% in 2023)
  3. Los Angeles (-0.2 ppts; from 0.5% in 2022 to 0.3% in 2023)
  4. Boise, ID (-0.3 ppts; from 1.3% in 2022 to 1.0% in 2023) 
  5. Oakland, CA (-0.5 ppts; from 2.5% in 2022 to 2.0% in 2023)

Pricey coastal metros like San Francisco, Oakland, and Los Angeles started 2023 with so few affordable homes, their shares didn’t have much room to fall. 

In four of the five metros with the smallest declines in the share of affordable homes (not counting Detroit), less than 5% of the homes listed in 2023 were affordable for the typical local household. 

The number of affordable home listings in 2023 also hit bottom

The number of homes affordable to the typical local house hunter also dropped to a record low in 2023—down 40.9% to 352,500 from 596,135 in 2022. It’s also down from over a million affordable homes per year during the 2010s. 

While the decline in affordable homes is partly due to an overall decline in listings—falling 21.2% year over year—it’s also due to the one-two punch of high mortgage rates and persistently high home prices, which raised the cost of any homes that did reach the market. 

Since their October peak, mortgage rates have fallen to around 6.70% for the 30-year fixed, but that’s still quite a bit higher than they were in early 2022. And the typical homebuyer’s monthly mortgage payment is about $250 more compared to a year ago. 

High mortgage rates have also driven up housing costs by creating a lock-in effect, which limited the influx of new listings. Many homeowners opted to stay put in 2023 instead of selling because they didn’t want to lose their much lower mortgage rate. That, in turn, drove up prices because buyers were competing for a smaller pool of available homes. 

Redfin-Affordable-home-listings-drop-41-pct-from-2022-to-2023

Source: Redfin

As Redfin Senior Economist Elijah de la Campa points out, though, housing affordability has already begun to improve, and Redfin expects that trend to continue in 2024. 

Many of the factors that made 2023 the least affordable year for homebuying on record are easing. 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.

Elijah de la Campa

Zillow Senior Economist