2024 Promises Turnaround For Home Affordability

After suffering through the least affordable year to buy a home, things are looking up for homebuyers in 2024.

This year, a homebuyer earning the U.S. median income of $78,642 would have had to spend 41% of their earnings on monthly housing costs if they purchased a $408,806 median-priced home. That's up from 38.7% in 2022 and 31% in 2021, according to a report from real estate company Redfin.

The least affordable markets were San Francisco and Anaheim, California, where buyers with typical local income would have had to spend more than 80% of their pay on housing costs. Most people are forced to rent because it's not financially feasible to get a mortgage if your monthly payment is 70% to 80% of your income.

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Detroit and Pittsburgh were the most affordable.

Homebuyers in 2023 needed to make an annual income of at least $109,868 if they wanted to spend no more than the recommended 30% of their earnings on housing payments for a median-priced home. That's $31,226 more than the typical household earns in a year.

"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," said Redfin Senior Economist Elijah de la Campa. "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."

Austin, Texas, is the only metro area that become more affordable this year. Someone making the $99,523 median income would have had to spend 36.6% of their income on monthly housing costs if they purchased a $456,950 median-priced home, down from 37.7% in 2022.

But there's hope for homebuyers in 2024. Housing prices have begun to decline as mortgage rates have dropped. The typical homebuyer's monthly payment was $2,575 during the four weeks ending Nov. 26, down from its peak in October but still up 13% year over year. More new listings hit the market than at any point in the past two years.

Redfin expects mortgage rates to fall to about 6.6%, and prices will decline by 1% as more new listings hit the market next year.

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