According to a recent report by Redfin, affordable housing options in the United States have hit an all-time low. The report revealed that only 1 in 5 homes were affordable for the typical household in 2022, down from 2 in 5 in 2021. The criteria for affordability was based on a home not exceeding 30% of the local county’s median income.

In 2022, there was a 53% decline in the number of affordable housing listings. This decrease was also the largest since Redfin began tracking the statistic in 2013. While part of this drop can be attributed to the “lock-in” effect, keeping people in their homes for longer periods in fear of higher interest rates on new mortgages, rising interest rates have also played a part in reducing buying power.

The report identified three primary reasons for the intensified housing affordability crisis:

• The average 30-year fixed mortgage rate has risen to 6.65% from the all-time low of 2.65% in 2021 as the Federal Reserve tries to curb inflation. As a result, the monthly mortgage payment on a median-priced home has increased by more than $500 from last year.
• During the pandemic homebuying boom, home prices experienced a surge, rising faster than incomes. While prices have since decreased by 12% from their peak in May, they are still approximately 32% higher than they were three years ago before the pandemic began.
• The lack of available homes for sale is keeping prices high. In January, there were fewer new listings than any month on record aside from April 2020, when the pandemic brought the housing market to a halt.

Redfin Deputy Chief Economist Taylor Marr maintains a positive outlook for affordable housing despite the current challenges. Marr expressed optimism by stating that there is good news on the horizon: “Housing affordability should improve eventually. As the Federal Reserve makes progress in fighting inflation, mortgage rates will come down, and home prices have already begun to decline. Additionally, incomes are growing at a faster pace than historical norms.”

However, it remains to be seen how long it will take for the housing market to stabilize and for affordable housing options to become available to a wider range of people. In the meantime, the housing affordability crisis will continue to affect many Americans and widen the wealth gap.