Affording a house in the US hasn’t been this difficult since “Back to the Future” was the top movie in theaters.
Home affordability fell again in the third quarter to the lowest level since 1985, according to data from the National Association of Realtors (NAR) shared exclusively with Insider.
Would-be buyers remain out of luck as property prices steadily climb. The median US home cost $406,900 in Q3, which was 2.2% higher than last year, according to the NAR’s Q3 US housing market report released on November 9. That follows a 2.4% year-over-year decline in Q2.
As if elevated home prices weren’t enough of a challenge, buyers must also contend with 23-year-high mortgage rates.
Thirty-year fixed mortgage rates ranged from 6.8% to 7.3% last quarter, according to the NAR. In turn, the trade group said the average monthly payment for a standard starter home with a 10% down payment rose 6.9% in Q3 from the prior quarter and a crippling 19% year-over-year.
Nearly 27% of a typical family’s monthly income went toward mortgage payments in Q3, the NAR found, which was slightly higher than the 25.3% rate in Q2 and the 23.5% clip in Q3 2022. In half of US markets, families almost needed at at least a six-figure income to afford such a setup.
Naturally, homeowners are reluctant to move since they’d face exorbitant borrowing costs. Plus by staying put, they benefit from swelling home values caused in part by limited supply. That creates a self-fulfilling prophecy where a housing shortage drives prices even higher.
“Homeowners have accumulated sizable wealth, with a typical homeowner earning more than $100,000 in overall net worth since 2019 and before the height of the pandemic,” said Lawrence Yun, the NAR’s chief economist, in a statement for the NAR’s new report.
Yun continued: “However, the persistent lack of available homes on the market will make the dream of homeownership increasingly difficult for younger adults unless housing supply is significantly increased.”
25 cities where home prices receded in Q3
Contrary to some pundits’ predictionsproperty prices didn’t crater due to lofty mortgage rates.
Home values rose in 82% of the real estate markets that the NAR tracks, which is significantly higher than the 58% rate from April to June. Even more striking is that 11% of metropolitan areas saw prices grow by double digits, which was more than double the prior quarter’s 5% rate.
Single-family home prices rose fastest in the Northeast and Midwest by just over 5% each, the NAR said, while the South and West saw milder increases of 1.7% and 0.6%, respectively.
However, property prices did fall in some cities. Thirty-eight metro areas saw prices fall from 2022 in Q3, and 25 of those saw significant drops of over 1%.
“Following the big price changes during the last several years, it’s natural to witness momentary swings in prices,” Yun said in the report. “Some markets that experienced sizable home price gains since 2020 have turned lower, resulting in temporary relief for prospective home buyers.”
Below are the 25 US metro areas where single-family home prices fell at least 1% from last year in the third quarter. Along with each market is its year-over-year home price change and the median home price in the second and third quarters of 2023, as well as the third quarter of 2022.
