Roughly 1 in 5 new mortgages went to low-income
homebuyers in 2023, down from 23% in 2020. Meanwhile, high-income
buyers have gained share because they’re more prepared to weather
the storm of high home prices and mortgage rates
(NASDAQ: RDFN) — Roughly one in five (20.6%) new mortgages
issued last year went to low-income Americans, bringing that
group’s piece of the homebuying pie back down to where it was in
2018. That is according to a new report from Redfin (redfin.com),
the technology-powered real estate brokerage.
Low-income earners gained ground at the start of the pandemic,
taking out 23.2% of all new mortgages in 2020, but that progress
has since been erased because high home prices and elevated
mortgage rates have eroded affordability.
The small bit of progress that Americans earning very low
incomes made on taking out mortgages at the start of the pandemic
has also been erased. Just under 6% of new mortgages issued last
year went to very low income Americans, down from 7.7% in 2020.
Very-low-income Americans now make up a smaller percentage of
mortgage borrowers than they did in 2018 (7.1%).
Higher-income homebuyers are taking up the share of new
mortgages that lower-income homebuyers have lost in the last
several years. While low-income borrowers gained share during the
pandemic and then lost it, the opposite has happened with
high-income borrowers, who are more prepared to weather the storm
of high prices and rates. Nearly half (44.8%) of all new mortgages
nationwide went to high-income buyers in 2023, bringing that
group’s piece of the pie back up to almost exactly where it was in
2018. Their share dipped to a low of 41.2% in 2020.
This is according to a Redfin analysis of Home Mortgage
Disclosure Act (HMDA) data covering purchases of primary homes.
Homebuying has become increasingly out of reach for lower-income
people because housing affordability dropped to a record low in
2023 due to sky-high home prices and mortgage rates. Affordability
hasn’t improved during the first few months of 2024:
- Home prices: Today’s median-home sale price is about
$420,000, up 5% year over year. That’s up nearly 40% since the
start of the pandemic in March 2020 and up nearly 50% since March
2019.
- Mortgage rates: Today’s average 30-year mortgage rate is
about 7.2%, up from 6.43% a year ago and more than double the
record low of 2.65% in 2021. It’s also higher than the 4% to 5%
levels in 2018 and 2019.
- Monthly payments: The typical homebuyer’s monthly
payment is now a record-high $2,886, up 13% year over year. That’s
up from just over $1,500 in both March 2020 and March 2019.
- Down payments: The typical down payment for someone
putting down 20% is $84,000, up from $80,200 a year ago, $60,800 in
March 2020 and $56,800 in March 2019.
While the U.S. economy is fairly strong, unemployment is low and
wages are increasing, housing costs are increasing much faster.
Hourly wages are up roughly 5% year over year, while monthly
housing costs are up 15%. Surging housing costs have an outsized
impact on low earners, who are less likely to have money in the
bank for down payments and record-high monthly payments.
“There was a sweet spot in 2020 when mortgage rates were ultra
low and home prices had yet to skyrocket, allowing some
lower-income Americans to break into the housing market,” said
Redfin Senior Economist Elijah de la Campa. “But somewhat
ironically, the continued strength of the economy has made it
harder to afford a home and widened the real-estate wealth gap
between rich and poor Americans. The Fed’s interest-rate hikes,
meant to help cool inflation and slow a hot economy, have pushed
mortgage rates to near their highest level in more than two
decades. That’s on top of home prices, which skyrocketed during the
pandemic buying boom and have stayed high due to a shortage of
homes for sale.”
It’s also important to note that due to the prevalence of
all-cash home purchases in today’s market, housing wealth is even
more concentrated in the hands of affluent Americans. More than
one-third of all U.S. home purchases were made in cash as of
February, near the highest level on record, and the share has
steadily been rising since 2020.
While high-income Americans made up the biggest piece of last
year’s homebuying pie, people at all income levels purchased far
fewer homes in 2023 than the year before. The number of U.S. homes
bought by high-income earners fell 19% year over year in 2023, and
it fell 18% for moderate earners, 22% for low-income earners and
31% for very-low-income earners. That’s because housing costs shot
up due to rising home prices and mortgage rates, and inventory
dwindled.
Low-income earners take up biggest share of homebuying pie in
Minneapolis, Detroit
Low-income earners take up the biggest piece of the homebuying
pie in relatively affordable Midwest and East Coast metros, where
home prices are lower. Nearly one-third (32.1%) of new mortgages
issued last year in Minneapolis went to low-income earners, the
highest share of any of the 50 most populous U.S. metros. It’s
followed by Detroit (30.8%), Philadelphia (29.9%), Virginia Beach,
VA (29.7%) and Baltimore (28.3%).
Low-income earners gained mortgage share from 2020 to 2023 in
just three of the metros in this analysis: Chicago (26.5% to
27.7%), Cleveland (26.4% to 27.8%) and Washington, D.C. (26.8% to
27.1%).
Just 1.9% of new mortgages issued last year in Anaheim, CA, went
to low-income earners, the lowest share in this analysis. Next come
Los Angeles (3.6%), Miami (4.4%), San Diego (5.5%) and San
Francisco (6.1%). Those California metros are among the most
expensive places to buy a home in the country.
To view the full report, including charts, metro-level data and
methodology, please visit:
https://www.redfin.com/news/home-mortgages-by-income-analysis
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/20240506540133/en/
Redfin Journalist Services: Ally Braun, 206-588-6863
press@redfin.com
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