A “Perfect Storm” in 2023 Caused an Affordability Crisis for the Ages

According to a new report from Redfin, 2023 was the least affordable housing year to the beginning of their records, but things are looking up for 2024. 

The median income for an individual in 2023 stood at $78,642 meaning someone trying to get into a median priced home at $408,806 would have to spend 41.4% of their monthly earning on housing—well above the standard 30%—and beats the previous high of 38.7% recorded in 2022. 

The 2023 homebuyer needed to eart an annual income of at least $109,868 if they wanted to spend the recommended 30% of their earnings on their home. That’s also a record high, up from 8.5% from 2022 and is $31,226 more than the typical homeowner earns per 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.” 

Housing affordability has dwindled because wages haven’t increased as quickly as homebuying costs. The median monthly housing payment for homebuyers in 2023 was a record $2,715, up 12.6% from 2022. Over the same period, the median household income rose just 5.2% to an estimated $78,642—also a record high, but not high enough to offset the jump in housing costs. 

Monthly mortgage costs for homebuyers soared this year as the Federal Reserve raised interest rates to combat inflation. The average 30-year-fixed mortgage rate hit a 23-year high of 7.79% in October, and while it has since fallen to 7.22%, that’s still more than double the 2.65% record low hit during the pandemic. 

Elevated mortgage rates have cooled homebuyer demand, but housing prices remain high because there aren’t enough homes for sale. The $408,806 median home sale price in 2023 is the highest of any year on record. Many homeowners are opting to stay put because selling and buying a new home would mean losing their low mortgage rate. 

Click here to see Redfin’s research in its entirety.