A recent study from Urban Institute found that 80 percent of homes on the market are unaffordable for households earning median incomes or less. Buyers at those income levels can afford only one out of five homes on the market. That is a steep drop from being able to afford approximately half of homes in 2016.
Home prices have remained high largely due to the declining number of active listings, from nearly 2.5 million in July 2015 to roughly 830,000 in October 2022, a 66.2 percent drop.
Listings for homes worth less than $350,000 experienced the greatest decline. In July 2015, they composed more than 70 percent of all active listings, compared with less than 40 percent of all active listings in October 2022.
During this period, listings for homes worth between $100,000 and $200,000 declined the most, by more than 18 percentage points, even after adjusting for overall price increases using Black Knight’s Housing Price Index, according to Urban Institute.
Rising interest rates have also made homeownership less accessible. For a median-price home (around $450,000), if the buyer made a 5 percent down payment, a monthly mortgage payment increased by more than $1,000 (from $1,802 to $2,844) when the interest rate increased from 3 percent to 7 percent. For those buyers who made a 20 percent down payment, the monthly payment increased from $1,518 to $2,395.