The American dream of owning a home is becoming increasingly elusive for many, as home affordability has plummeted to its lowest point in a decade. A confluence of factors, including soaring home prices, rising mortgage rates, persistent inflation, and stagnant wages, has created a challenging environment for aspiring homeowners. This is certainly evident in the current housing market as more homes are remaining for sale for longer periods of time.
The home affordability squeeze
The National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), a measure of housing affordability, fell to 37.4 in the third quarter of 2023, down from 40.5 in the second quarter. This means that just over one in three Americans can afford a median-priced home in their metro area.
The decline in affordability is primarily due to the rapid increase in mortgage rates. The average 30-year fixed mortgage rate has surged from 3.26% in January 2023 to 7.23% in October, making monthly mortgage payments significantly higher.
Rising home prices have also contributed to the affordability crunch. The median sales price of a home in the United States reached $482,000 in September 2023, up from $382,000 in September 2022. This increase in home prices is outpacing wage growth, making it even more difficult for potential buyers to save for a down payment.
The decline in home affordability is a serious concern that is affecting the lives of millions of Americans. Addressing this issue will require a concerted effort from policymakers, the housing industry, and the community at large to ensure that the dream of home ownership remains within reach for all.
To see where your state ranks in terms of home affordability, check out our article from earlier this year here. If you are looking to buy or sell real estate in the South Florida area, we can help. Contact Natasha at Live South Florida Realty, Inc. today! Also, be sure to download our free Florida Home Search app for your smartphone or tablet.