BAM Key Details: 

  • A new Redfin article shows nearly 40% of homeowners could not afford their homes if they were buying them today.
  • This is due to monthly housing costs reaching an all-time high with elevated mortgage rates and home prices that have doubled over the last decade. 
  • While baby boomers generally have equity to draw from for a home purchase, boomer respondents were most likely to say they could not afford to buy their current home if they had to purchase it today. 

Almost two out of five homeowners (38%) say they could not afford their own home if they were to buy it today. 

And while Baby Boomers typically have more financial resources to tap for a home purchase, they’re also the most likely to say they could not afford to buy their home today. 

That’s according to a new survey commissioned by Redfin and conducted by Qualtrics in February 2024, with responses from roughly 3,000 U.S. residents. 

Nearly six out of ten (59%) homeowners who answered this question (“Could you afford to buy your home if you were purchasing it today?”) have lived in their current home for 10 years or more, while another 21% have owned their home for at least five years. 

So, the majority of the homeowners responding to this survey have seen how home prices in their neighborhood have soared since they bought their current home. 

The median U.S. home sale price has doubled over the last decade. The past five years alone have seen a 50% jump in price. And they’ve soared for a number of reasons. 

Redfin-Nearly-40-pct-homeowners-could-not-afford-to-buy-their-current-home-today_chart

Source: Redfin

Doubled home prices and elevated mortgage rates

Even before the COVID pandemic, home prices were climbing due to a prolonged shortage in housing supply, combined with a strong labor market and growing population and household formation, which fueled buyer demand. 

Then, during the pandemic, those already high home prices rocketed in response to ultra-low mortgage rates and the nationwide increase in remote work, both of which accelerated homebuyer migration and drove demand through the roof. 

Then, since early 2022, mortgage rates have more than doubled, adding hundreds of dollars to monthly housing costs, providing yet another reason many homeowners could not afford their current home if they were looking to buy it in today’s market. 

Take a look at the difference: 

  • Buyer #1, who purchases today’s median-priced home for roughly $420,000, with a 7.1% mortgage rate (the current 30-year fixed rate average), is looking at a monthly housing payment of $2,864
  • Buyer #2, who purchases the same home at the same price, with a 4% mortgage rate—which was common back in 2019—would have a monthly payment of $2,210—about $650 less

Rising home prices are a double-edged sword. On the one hand, Americans who already own homes benefit from rising values and they can consider themselves lucky they broke into the housing market while they could still afford it. On the other hand, price appreciation makes the prospect of buying a new home daunting or even impossible for many people who want to move. Prices have risen enough that a similar home and location would be much pricier than a home someone already owns–even accounting for inflation. Add elevated mortgage rates to the equation, and moving up to a bigger, better home is even more costly and perhaps out of reach.

Elijah de la Campa

Redfin Senior Economist

First-time buyers, pessimistic renters, and “nepo-homebuyers”

First-time buyers face even wider affordability gaps since they don’t have equity from the sale of a previous home. Another Redfin report shows nearly 40% of today’s renters don’t believe they’ll ever become homeowners—up from 27% in 2023. 

Among Gen Zers and Millennials who do expect to purchase their first home soon, 36% plan to use a cash gift from family to afford their down payment

Baby boomers are least likely to afford their current home

Almost half (45%) of the baby boomers responding to the survey don’t believe they could afford a similar home in their neighborhood—compared to 39% of Gen Xers and 24% of Gen Zers and Millennials. 

So, despite the fact boomers typically have equity built up to put toward a new home purchase, based on their survey answers, they’re the generation least confident in their ability to afford their current home if they were to purchase it today. 

The reason? Of all the generations, boomers are most likely to have purchased their home a long time ago for a much lower price. 

Of course, fewer boomers opting to sell their homes to relocate or downsize (or both), means fewer existing homes being added to the market. Nationwide, empty-nest boomers own twice as many homes as millennials with children, largely because many older homeowners see little to no incentive to move and are deciding to stay put. 

Lower-income homeowners least likely to afford their home

Broken down by income-level, 51% of homebuyers earning less than $50,000 a year would not be able to afford their current home if they had to purchase it today. 

At the next income tier, 34% of those earning $50,000 to $100,000 wouldn’t have the necessary funds to buy their current home, followed by 21% of those earning more than $100,000 a year. 

ll the more reason to help your homeowner and buyer clients understand the costs they’re facing as well as what they can truly afford on a monthly basis.