Housing affordability stabilizes – report

Report highlights opportunities in certain housing markets

Housing affordability stabilizes – report

For the first time in four years, US housing affordability did not significantly worsen, according to a new report by real estate brokerage Redfin. The study revealed that a median-income household in 2024 would have needed to allocate 41.8% of its earnings to afford a median-priced home, a slight improvement from 42.2% in 2023. However, this figure remains far above the pre-2020 affordability benchmark of 30%.

To comfortably afford the median-priced US home, valued at $429,734 in 2024, a buyer needed an annual income of $116,782—a record high. This is nearly $33,000 more than the nation’s median household income of $83,782. The typical monthly payment for homebuyers rose to $2,920, marking an 86% increase from 2019 levels.

The marginal improvement in affordability is attributed to wage growth outpacing the rise in monthly housing payments, supported by a slight dip in average mortgage rates from 6.81% in 2023 to 6.72% in 2024. Despite these gains, Redfin’s senior economist Elijah de la Campa noted that housing remains unattainable for many.

“Affordability improved ever so slightly this year because wage growth outpaced the growth in monthly housing payments,” de la Campa said. “But that’s not to say buying a home became affordable. For many Americans, buying a home remains more out of reach than ever and that’s unlikely to change anytime soon.”

Regional trends

Housing affordability improved in several Texas cities due to increased inventory and slower price growth. Austin led the nation with a 3.2-point reduction in the share of income required for monthly housing costs, followed by San Antonio, Dallas, and Fort Worth. Portland, OR, also made the top five for improved affordability.

Conversely, Anaheim, CA, experienced the largest drop in affordability. A household earning Anaheim’s median income of $121,925 would need to spend 75.9% of its earnings on housing, up from 71.8% in 2023. Rising home prices were a significant factor, with Anaheim posting a 12.4% year-over-year price increase, the steepest among the nation’s largest metros.

California dominated the list of least affordable markets, with Los Angeles, San Francisco, Anaheim, San Jose, and San Diego claiming the top spots. Outside California, New York City also ranked high, requiring buyers to allocate 65.9% of their income to housing costs.

In contrast, the Rust Belt remained a haven for affordability. In Pittsburgh, buyers spent only 25.3% of their income on housing, followed by Detroit (25.5%), St. Louis (26%), Cleveland (26.4%), and Warren, MI (28%).

Read more: We show you the cheapest county in California, and 4 other cheap choices!

Outlook

Redfin projects that rising home prices and limited inventory will continue to challenge buyers in 2025. “Even with inventory trending upwards, we still expect prices to continue rising in 2025 due to a lack of homes for sale—pushing more would-be homebuyers to rent instead,” de la Campa advised.

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