After the pandemic, housing became notably less affordable, with both mortgage rates and home sales prices spiking over the course of 2022 and 2023 [1][2]. While these rates have been recovering slowly, with mortgage rates finally dipping just under 7% in December, they are still higher than in September 2022 [1].
Buying a house has never been a small task, but these recent developments have made it more difficult than ever for homeowners trying to break into the market. Zillow's December 2023 report on housing affordability shows that it has still not recovered from its post-pandemic spike [3]. The monthly new homeowner burden statistic demonstrates how much of a financial burden new homeowners are expected to take on, accounting for property tax and home insurance. In December 2019, just before the start of the pandemic, the new homeowner burden was 23%, yet in December 2023, the burden was 38.6%. While this is an improvement from October 2023's 40.4% homeowner burden, these numbers are still significantly above the burden of homeowners pre-pandemic.
Furthermore, Zillow claims that while many are looking to buy a home due to rising rent prices, the cost of a home and down payment remain a tall barrier for prospective homeowners [3]. Around the Los Angeles area of California, they estimate it would take a person of median income around 20.9 years of saving to afford a home.
These statistics are not just raw numbers but are backed by the attitudes of the population at large. In a separate study by Zillow, around half of adults correctly estimated that the current mortgage rate averaged below 6% [4]. Most of those surveyed also did not expect mortgage rates to come down, although those who correctly estimated the current mortgage rate were more likely to be optimistic about potentially dropping mortgage rates than those who estimated incorrectly. Zillow agrees with pessimistic outlooks for housing affordability, predicting that the financial barriers surrounding homeownership in 2023 will unlikely grow any easier without government intervention [3].
While overall trends in 2023 look grim, December 2023 has been a slight improvement over the spiking trends in 2022. The recent dip in mortgage rates and housing costs is small but a sign of hope for good things to come.
Are you concerned about navigating the housing market in 2024? Contact us at Kho and Young; we can help you no matter your situation!
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