Latest Statistics from Redfin Demonstrates Affordability Challenges
Written By: Joel Palmer, Op-Ed Writer
Anybody who has bought a home, has tried to buy a home, or is involved in selling or financing real estate knows housing affordability has been an issue for some time.
Last week, real estate brokerage Redfin released data showing the extent of how challenging it is for some consumers to buy a home.
In the previous four weeks, the typical U.S. monthly house payment hit an all-time high of $2,721. That was 10 percent higher than the same period a year ago, Redfin reported.
In addition to higher mortgage rates, the median home-sale price is up 5 percent year over year to roughly $375,000 and just about $9,000 shy of June 2023’s record high.
Potential good news from this data includes a rise in listings as owners try to take advantage of current values. More supply seems to be bringing in more potential buyers, as mortgage-purchase applications are up 14 percent from a month ago.
Even with higher sales prices, buyers found enough cash to put down a median down payment of $55,640 in February. That was up 24.1 percent from $44,850 a year earlier—the largest annual increase in percentage terms since April 2022.
The typical homebuyer’s down payment last month was equal to 15 percent of the purchase price, up from 10 percent a year earlier.
More than a third of home buyers (34.5 percent) accumulated enough cash to buy without financing in February. Redfin defines an all-cash purchase as a home purchase with no mortgage loan information on the deed.
The amount of all-cash sales puts many first-time buyers at a disadvantage in the market. They don’t have the equity from the sale of a previous home to bolster their down payments. Plus, sellers tend to prefer cash buyers to those who need financing.
Redfin said many all-cash offers come from investors, who were buying up more than one-quarter of the country’s low-priced homes as of the end of last year.
Even with financing, it’s increasingly difficult for first-time buyers.
Redfin said homebuyers needed annual income of $75,849 to afford the typical U.S. starter home as of February. That was 8.2 higher than last year. The monthly housing payment for the typical U.S. starter home was $1,896 in February, also up 8.2 percent from a year earlier.
The typical starter home sold for $240,000 in February, up 3.4 percent year over year.
Starter homes are roughly half as affordable as they were before the pandemic. Americans needed to earn $40,465 annually to afford the typical U.S. starter home in February 2020, when the median sale price was $169,000 and the average mortgage rate was about 3.5 percent.
It’s even more challenging for buyers who want to own a median-priced home.
The typical U.S. household earns $29,448 less than it needs to afford the median-priced home, based on a Redfin analysis of the estimated median U.S. household income and median monthly housing payments as of February 2024.
Buyers needed to earn an annual income of $113,520 to afford the median-priced U.S. home in February ($412,778). That’s 35 percent more than the $84,072 median household income.
There is one small sign that home price growth is softening. Nearly 6 percent of home sellers lowered their asking price in the past week.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
