Nearly 40% of Homeowners Couldn’t Afford Their Home If They Were to Buy It Today
April 23 2024 - 7:30AM
Business Wire
Redfin reports many U.S. homeowners wouldn’t be
able to afford to buy their home if they were to purchase it today
because home prices have doubled over the last decade, and monthly
housing costs are at an all-time high
(NASDAQ: RDFN) — Nearly two of every five (38%) homeowners don’t
believe they could afford to buy their own home if they were
purchasing it today, according to a new report from Redfin
(redfin.com), the technology-powered real estate brokerage.
This is based on a Redfin-commissioned survey of roughly 3,000
U.S. residents conducted by Qualtrics in February 2024.
Nearly three in five (59%) homeowners who answered this question
have lived in their home for at least 10 years, and another 21%
have lived in their home for at least five years. That means the
majority of respondents have seen housing prices in their
neighborhood skyrocket since they purchased their home: The median
U.S. home-sale price has doubled in the last 10 years, and has shot
up nearly 50% in the last five years alone.
Home prices have soared over the last decade for several
reasons. Already-high home prices skyrocketed during the pandemic,
when remote work and ultra-low mortgage rates motivated many
Americans to move and buy homes. Even before the pandemic buying
boom, home prices were increasing due to a prolonged supply
shortage, along with a strong labor market and growing population
pushing up demand.
Rising mortgage rates are another reason many homeowners
couldn’t afford their own home if they were to buy it today. The
typical person purchasing today’s median-priced home for about
$420,000 has a record-high $2,864 monthly housing payment with a
7.1% mortgage rate, the current 30-year fixed-rate average. If they
were to purchase a home for the same price with a 4% mortgage rate,
which was common in 2019, their monthly payment would be $2,210,
roughly $650 less.
“Rising home prices are a double-edged sword. On the one hand,
Americans who already own homes benefit from rising values and they
can consider themselves lucky they broke into the housing market
while they could still afford it,” said Redfin Senior Economist
Elijah de la Campa. “On the other hand, price appreciation makes
the prospect of buying a new home daunting or even impossible for
many people who want to move. Prices have risen enough that a
similar home and location would be much pricier than a home someone
already owns–even accounting for inflation. Add elevated mortgage
rates to the equation, and moving up to a bigger, better home is
even more costly and perhaps out of reach.”
The situation is especially dire for first-time buyers, who
haven’t built up equity from the sale of a previous home. Nearly
40% of U.S. renters don’t believe they’ll ever own a home, up from
27% last year. Of the Gen Zers and millennials who do expect to buy
their first home soon, more than one-third (36%) expect to use a
cash gift from family to help with their down payment.
Baby boomers least likely to be able to afford to buy their
own home today
Broken down by generation, baby boomers are least likely to be
able to afford their current home if they were to buy it today.
Nearly half (45%) of baby boomers said they couldn’t afford a
similar home in their neighborhood now, compared to 39% of Gen Xers
and 24% of Gen Zers and millennials. That stands to reason, as baby
boomers are more likely to have bought their home a long time ago
for a much lower price. That dynamic contributes to the shortage of
homes for sale: Empty-nest baby boomers own twice as many large
homes nationwide as millennials with kids, largely because older
Americans, with no financial incentive to sell, are hanging onto
their homes.
Unsurprisingly, lower-income homeowners are least likely to be
able to afford their own home today. More than half (51%) of
respondents earning under $50,000 annually wouldn’t be able to
afford their home, compared to 34% of people earning
$50,000-$100,000 and 21% of people earning more than $100,000.
To view the full report, including a chart and more details on
methodology, please visit:
https://www.redfin.com/news/survey-homeowners-afford-own-home
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate
company. We help people find a place to live with brokerage,
rentals, lending, title insurance, and renovations services. We run
the country's #1 real estate brokerage site. Our customers can save
thousands in fees while working with a top agent. Our home-buying
customers see homes first with on-demand tours, and our lending and
title services help them close quickly. Customers selling a home
can have our renovations crew fix it up to sell for top dollar. Our
rentals business empowers millions nationwide to find apartments
and houses for rent. Since launching in 2006, we've saved customers
more than $1.6 billion in commissions. We serve more than 100
markets across the U.S. and Canada and employ over 4,000
people.
Redfin’s subsidiaries and affiliated brands include: Bay Equity
Home Loans®, Rent.™, Apartment Guide®, Title Forward® and
WalkScore®.
For more information or to contact a local Redfin real estate
agent, visit www.redfin.com. To learn about housing market trends
and download data, visit the Redfin Data Center. To be added to
Redfin's press release distribution list, email press@redfin.com.
To view Redfin's press center, click here.
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version on businesswire.com: https://www.businesswire.com/news/home/20240423081712/en/
Redfin Journalist Services: Ally Braun, 206-588-6863
press@redfin.com
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