Housing Affordability Shows Signs of Improvement in 2023

Home buyers’ dilemma

A serious lack of housing affordability has made home buying challenging over the last few years.

Seemingly unquenchable demand turned the housing market into an inventory desert and property values took off at record rates.

However, the worst may be in the past for borrowers as conditions changed for the better in the first quarter, according to property data provider Attom.

Home price growth slows

A staggering pace of home price growth is the main culprit for today’s affordability woes.

Fortunately, the rate of appreciation decelerated to a near plateau. The median home price hit $320,000 in 2023’s opening quarter, only inching up slightly from $318,000 quarter-over-quarter and $316,000 year-over-year.

After posting annual double-digit gains in every quarter from Q3 2020 to Q2 2022, the U.S. median home price grew 7% in Q3 2022, 2% in Q4 2022 and just 1% in Q1 2023. That latest 1% marks the lowest year-over-year change since the first quarter of 2012.

For reference, the median home price increased annually by an average of 5% from 2016 to 2019, according to Attom.

“The soaring housing market has finally come back down in much of the U.S., at least for now, while worker pay is growing. That’s produced some benefits for home seekers in the form of slightly better affordability, especially as lending rates have flattened out,” said Attom CEO Rob Barber. “Price drops and wage gains haven’t yet translated into equal improvements in affordability. But the scenario is becoming more favorable for buyers.”

The biggest risers and fallers

Attom analyzed data for counties with a population of at least 100,000 and at least 50 single-family home and condo sales in the first quarter of 2023. This resulted in a dataset of 572 counties.

Broken down at this local level, median home prices fell in 435 counties (76%) quarter-over-quarter and in 191 counties (33.4%) year-over-year. Meanwhile, the median price rose quarterly in 124 (21.7%) and annually in 371 (64.9%). Additionally, 13 (2.2%) recorded no quarterly change while 11 (1.9%) stayed flat annually.

The biggest overall yearly dip in median home price came in counties of Robeson, N.C., St. Clair, Ill., and Washington, Pa., with respective drops of 28.7%, 28.6% and 22.4%. Conversely, the largest annual gains came in Jackson, Miss., at 79.5%, St. Louis, Mo., at 38.2%, and Schuylkill, Pa., at 36.1%.

From the fourth quarter of 2022, St. Clair and Robeson flipped spots with declines of 34.6% and 21.2%. St. Louis, Minn., followed with a 20% decrease. St. Lawrence, N.Y., led all counties with a 29.1% quarterly uptick. St. Louis, Mo., came next at 19.7%, then Midland, Texas’ 14.3%.

Of the 46 counties with populations above 1 million, the largest annual declines came in the California counties of Alameda at 15.9%, Santa Clara at 12.1% and Contra Costa at 11.7%.

The biggest annual increases came in St. Louis, Mo., at 38.2%, Palm Beach, Fla., at 11.3% and Collin, Texas at 9.8%.

Wayne, Mich., had the largest drop, with the median home price falling 13.3% quarter-over-quarter. Alameda and Contra Costa followed with decreases of 8.7% and 7.8%.

St. Louis, Mo., Collin and Palm Beach led the way in quarterly price increases, with gains of 19.7%, 2.8% and 2.4%, respectively.

Your next steps

With housing inventory making gains from the pandemic’s record lows, housing affordability started to see improvements as well.

If the conditions of the last few years shut you out of homeownership, 2023 could be your time.

Reach out to a local lender to see how your market is shaping up and what interest rate and loan types you qualify for.