Redfin Reports There Were Half as Many Affordable Homes for Sale in 2022 as There Were in 2021

(NASDAQ: RDFN) — Roughly one in five (21%) U.S. homes for sale in 2022 was affordable for the typical household, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s down from two in five (40%) in 2021 and the lowest share on record.

A listing is considered affordable if the estimated 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—the largest annual drop in Redfin’s records, which date back to 2013. While that’s partly due to a decline in listings in general—new listings fell 10% year over year—it’s mostly due to the fact that higher mortgage rates made the listings hitting the market less affordable.

The housing affordability crisis has intensified for three primary reasons:

• Mortgage rates have more than doubled from the all-time low of 2.65% in 2021 as the Federal Reserve seeks to quell inflation. The average 30-year-fixed mortgage rate today is 6.65%, which has caused the monthly mortgage payment on the median-asking-price home to increase by over $500 from this time last year. The average rate in 2022 was 5.34%, up from 2.96% in 2021.
• The pandemic homebuying boom caused home prices to surge, and they increased faster than incomes. While prices have fallen 12% from their May peak, they remain about 32% higher than they were before the pandemic started roughly three years ago.
• There aren’t enough homes for sale, which is keeping prices afloat. There were fewer new listings in January than any month on record aside from April 2020, when the onset of the pandemic brought the housing market to a halt.

“Housing affordability is at the lowest level in history, which will widen the wealth gap—especially between millennials,” said Redfin Deputy Chief Economist Taylor Marr. “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. ”