Rising mortgage rates and home prices in 2023 have further strained affordability for homebuyers, limiting access to all but high-income households in many U.S. metro areas. In Q2 2023, median home prices increased in 171 out of 177 metros, with a 9% quarterly rise on average, according to the National Association of Realtors. Mortgage rates also climbed from 6.37% to 6.51% from Q1 to Q2 and surpassed 7% by mid-August, sending monthly payments on median-priced homes to record highs in 159 of 177 metro areas.
To keep up with fast-rising housing costs, the typical household must have an annual income of $99,600, up from $52,600 just three years ago. That affordability crisis has led to a 15% drop in existing home sales compared with the previous year, affecting first-time buyers and perpetuating wealth inequalities, Harvard’s Joint Center for Housing Studies reports.
In the median metro, monthly homeowner costs hit $2,500 in the second quarter of 2023, which was an increase of $750 per month since interest rates began their ascent last year. Monthly payments are now over $2,000 in most metro areas
Indeed, in nearly half (48 percent) of all metros, an annual income of at least $100,000 was required to afford payments on the median-priced home. Back in the first quarter of 2020, an income of $100,000 or more was required to afford the median home in just 7 percent of all metros.