BAM Key Details:

  • A new Redfin report shows 2023 to be the least affordable year on record for home buying—but offers some hope for 2024. 
  • The U.S. homebuyer earning the national median annual income ($78,642) would have spent 41.4% on monthly housing costs for the median-priced home ($408,806). 

According to a new report from Redfin, 2023 set a new record low for housing affordability. But 2024 could bring a change for the positive. 

American homebuyers making the $78,642 median U.S. income in 2023 would have had to spend 41.4% of that on their monthly housing costs if they purchased a home at the national median sale price ($408,806). 

That’s up from 38.7% in 2022—and the highest share on record. 

Put another way, the typical 2023 homebuyer would need a minimum annual income of $109,868 to spend no more than 30% of it on the median-priced home. 

That record high minimum income is up 8.5% from 2022 and is $31,226 more than the typical household income in 2023. 

Redfin-chart-Income-needed-to-afford-typical-home-hits-new-high-in-2023

Source: Redfin

A perfect storm of inflation, high prices, soaring mortgage rates and low housing supply caused 2023 to go down as the least affordable year for housing in recent history. The good news is that affordability is already improving heading into the new year. Mortgage rates are coming down, more people are listing homes for sale, and there are still plenty of sidelined buyers ready to take a bite of the fresh inventory. We expect these conditions to continue to improve in 2024.

Elijah de la Campa

Redfin Senior Economist

Monthly mortgage payments have grown more than twice as fast as wages

The median monthly mortgage payment for homebuyers in 2023 was 12.6% higher than 2022, setting a new record at $2,715. 

During that same period, the median household income increased by only 5.2%, reaching an estimated $78,642, which is also a record high but not nearly enough to offset the increase in housing costs. 

Monthly mortgage rates also soared this year, with the 30-year fixed reaching a 23-year high of 7.79% on October 23rd (Freddie Mac) before dropping below 7.30% on November 22nd. The daily average rate dropped below 7.20% on November 29, but it’s still more than twice the 2.65% record low reached during the pandemic. 

And while those elevated mortgage rates have sidelined plenty of would-be home buyers, home prices remain high because the housing supply is still too low to meet demand. 

This year’s median home sale price (based on Redfin’s data through October) is $408,806—the highest on record. 

Generally, higher sale prices mean higher monthly mortgage payments. And while buyers can often negotiate a lower rate, there’s no whittling down the final sale price once the deal is struck. 

Based on the data in Redfin’s report, we’ll look at the ten most affordable metros—ranked by the share of median income that would go to monthly housing costs for median-priced homes—as well as the 10 least affordable and metros where affordability improved or declined the most.

Redfin’s chart breaks it all down, showing the following data for all 50 of the metros analyzed: 

  • Share of median local income needed to pay housing costs on the median-priced home
  • Year-over-year (YOY) change in the share of earnings needed to pay housing costs… 
  • Median monthly housing payment for homebuyers
  • Median estimated household income
  • Median home sale price
  • YOY change in median home sale price

Austin is the only U.S. metro where mortgage affordability has improved

Of the 50 largest U.S. metros Redfin analyzed, Austin, TX, stood alone as the only metro where affordability actually improved from 2022 to 2023. 

In 2023, an Austin homebuyer earning the $99,523 median income would have spent 36.6% of that on monthly housing costs if they bought a median-priced home (456,950). That share of income is down from 37.7% in 2022. 

That’s the only decline in all 50 of the most heavily populated U.S. metro areas. 

The metros with the smallest upticks in the share of income going to housing costs are led by— 

  • Detroit — up 0.7 percentage points (ppts) to 18.5%
  • Oakland, CA — up 0.7 ppts to 53.3%
  • Phoenix — up 0.9 ppts to 40.2%
  • Las Vegas — up 1.2 ppts to 43.8%

In most of these metros, housing affordability had already been so strained it couldn’t get much worse. 

During the pandemic, remote workers flooded into Austin, Phoenix, and Las Vegas, driving home prices up to unsustainable levels. As more people have been priced out, prices have started coming back down.

This year, Austin had the biggest annual drop in home prices of all the major U.S. metros, followed by Oakland, Phoenix, and Las Vegas: 

  1. Austin—home prices dropped 9.2% year over year
  2. Oakland—down 5% YOY
  3. Phoenix—down 4.1% YOY
  4. Las Vegas—down 3.6% YOY 

Anaheim and Miami had the biggest decreases in mortgage affordability

Meanwhile, Anaheim, CA, saw the biggest decrease in mortgage affordability. An Anaheim homebuyer with the median household income of $92,306 would have had to spend 88.3% of that on monthly housing costs if they bought a median-priced home ($1,022,075). 

That’s an 8.1 percentage point increase from 80.2% in 2022—and the biggest jump of all the 50 metros in Redfin’s analysis. 

So, the five metros with the biggest jumps in the share of median income going to housing costs for the median-priced home: 

  1. Anaheim, CA — up 8.1 percentage points (ppts) to 88.3%
  2. Miami, FL — up 7.1 ppts to 54.1%
  3. West Palm Beach, FL — up 6.2 ppts to 49.1%
  4. San Diego, CA — up 5.9 ppts to 64.6%
  5. Newark, NJ — up 5.6 ppts to 42.8%

In many of the metros listed above, home prices are still climbing because there’s still demand from buyers moving in from more expensive metros to get more home for their money. 

Miami and West Palm Beach are also attracting out-of-state buyers who are drawn to Florida’s low taxes, warmer weather, and politics. 

After Milwaukee, WI, Miami, FL, posted the second biggest uptick in home prices among the 50 largest metros this year—up 8.2% from 2022. 

The five metros with the biggest annual increases in home prices: 

  1. Milwaukee, WI — up 9.0%
  2. Miami, FL — up 8.2%
  3. Newark, NJ — up 8.2%
  4. West Palm Beach, FL — up 7.6%
  5. Fort Lauderdale, FL — up 6.9%

The least affordable U.S. metros

California takes six of the top 10 spots on the list of least affordable U.S. metros. 

As stated earlier, an Anaheim, CA, homebuyer earning the median income and purchasing a median-priced home in 2023 would have had to spend 88.3% of their earnings on monthly housing costs—the highest share of the 50 metros in Redfin’s analysis. 

Most people earning the median income in the least affordable metros are forced to rent because the monthly mortgage payment on available homes would take too large a share of their household income. 

If 30% is the maximum recommended share, 50% would not be considered financially feasible, let alone 70-80% and beyond. 

10 least affordable U.S. metros:

  1. Anaheim, CA (88.3% of the median income would be needed to cover monthly housing costs for the median home sale price of $1,022,075)
  2. San Francisco, CA (85.4% for $1,444,700)
  3. San Jose, CA (73% for $1,433,625)
  4. Los Angeles, CA (72.9% for $844,500)
  5. San Diego, CA (64.6% for $843,450)
  6. New York, NY (56.7% for $684,750)
  7. Seattle, WA (54.3% for $765,760)
  8. Miami, FL (54.1% for $504,990)
  9. Oakland, CA (53.3% for $900,575)
  10. Nassau County, NY (50.9% for $614,355)

The most affordable U.S. metros

At the other end of that spectrum is Detroit, MI, where someone earning the median household income (for Detroit) of $74,971 would have had to spend 18.5% of that on their monthly housing costs, if they bought a home at the median sale price (again, for Detroit) of $173,785. 

That’s the lowest share of all 50 of the metros analyzed. And looking at Redfin’s chart, the top seven of the 10 most affordable U.S. metros all have median home prices below $300,000. 

10 most affordable U.S. metros:

  1. Detroit, MI (18.5% of median income would be needed to cover monthly housing costs for the median home sale price of $173,785)
  2. Pittsburgh, PA (23.5% for $218,973)
  3. Cleveland, OH (23.8% for $204,773)
  4. Philadelphia, PA (23.9% for $265,100)
  5. St. Louis, MO (25.2% for $247,852)
  6. Cincinnati, OH (27.3% for $270,280)
  7. Indianapolis, IN (29.0% for $290,462)
  8. Chicago, IL (29.1% for $318,578)
  9. Baltimore, MD (30.0% for $358,335)
  10. Minneapolis, MN (30.4% for $366,350)

While Redfin’s data for 2022 and earlier spans the full year, data for 2023 goes through October. References to a record high are based on data going back to 2012. 

Read the full report for more information.