Around one in five U.S. homes for sale last year were affordable for the typical household, with half as many affordable homes for sale that year as the previous year.
A report from the technology-powered real estate company Redfin said that the percentage of homes for sale that were affordable for the typical household in 2022 is down from two in five in 2021 and the lowest share on record.
In a Friday release, it said that a listing is considered affordable if the estimate monthly mortgage payment is no more than 30% of the local county’s median income.
The number of affordable listings fell 53% from a year earlier in 2022, marking the largest annual drop in Redfin’s records.
While new listings dropped 10% year over year, Redfin said this is mostly due to the fact that higher mortgage rates made the listings hitting the market less affordable.
It listed three primary reasons for the intensification of the housing affordability crisis.
Mortgage rates have more than doubled from the all-time low of 2.65% in 2021, the COVID-19 pandemic homebuying boom caused home prices to surge and that there were fewer new home listings in January than during any month on record aside from April 2020.
The report also revealed that White households can afford three times as many homes as Black households and that pandemic boomtowns and expensive costal cities saw the largest declines in the number of affordable homes.
The 100 most populous metro areas all had fewer affordable homes for sale in 2022 than in 2021.
"Housing affordability is at the lowest level in history, which will widen the wealth gap — especially between millennials," Redfin Deputy Chief Economist Taylor Marr said in a statement. "Many millennials were able to buy their first home before or during the pandemic homebuying boom, but many others were priced out of homeownership and forced to keep renting. That means a lot of young adults missed out on a major wealth building opportunity: the value of homes owned by millennials has risen nearly 30% in the past year. "
Redfin noted that the Biden administration announced it would cut mortgage-insurance rates for homebuyers who take out loans backed by the Federal Housing Administration.
"The good news is that housing affordability should improve. Mortgage rates will eventually come down as the Fed makes progress fighting inflation, and home prices have already begun falling. Incomes are also growing faster than the historical norm," Marr said.