Some good news for potential homebuyers in 2024 — affordability didn’t worsen for the first time in four years, according to a Redfin study. Although buying a home became slightly more affordable last year, last year was the second most expensive homebuying year on record. Only 2023 was less affordable.
Affordability improved in half of the top 50 metros during the year, according to Redfin’s analysis that estimates monthly housing payments for the typical homebuyer using median home sale prices, monthly mortgage rates, median household incomes and the assumption of a 15% down payment.
Households earning $83,782 – the median US income – would have spent 41.8% of their income on monthly housing costs to buy a typical home priced at $430,000, Redfin found. That represents a slight improvement from 42.2% in 2023 but is considerably less affordable than in the 2010s.
“Affordability improved ever so slightly this year because wage growth outpaced the growth in monthly housing payments,” said Redfin senior economist Elijah de la Campa. “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. 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.”
In order to spend no more than 30% of their earnings on monthly payments for a median-priced home, homebuyers needed to earn an annual income of at least $116,782 last year. That is $33,000 more than the typical household makes in a year and is a record high. The rule of thumb that people should spend no more than 30% of their income on housing has become harder to achieve as housing prices have soared, said Redfin.
The median housing payment is up 4.3% from last year and 86% from 2019, while wages have grown by about 4% year-over-year. The slight improvement in affordability this year is mainly due to the slightly lower average mortgage rate of 6.72% compared to 6.81% in 2023. It was the fourth consecutive year that the income needed to keep home payments affordable was higher than the median household income.
The five least affordable markets are all in California, including Los Angeles, San Francisco, Anaheim, San Jose and San Diego. In markets where home prices soared, housing affordability tended to worsen. These markets include Chicago, Miami, Newark and San Jose.
Housing remained relatively affordable in Rust Belt markets with median home prices under $300,000. Pittsburgh, Detroit, St. Louis, Cleveland and Warren, Michigan, all ranked among the nation’s most affordable markets.