Lower-income Americans accounted for roughly one in five (20.6%) new mortgages issued in 2023, a level not seen since 2018, according to new data from Redfin (NASDAQ:RDFN).
The newly reported level represents a step down from the progress that lower-income Americans experienced during the Covid-19 pandemic – in 2020, this demographic took out 23.2% of all new mortgages. Very-low-income borrowers also found fewer homebuying opportunities in 2023 – this demographic took out slightly less than 6% of new mortgages last year, down from 7.7% in 2020 and from 7.1% in pre-pandemic 2018.
Lower-income earners have found more opportunities in relatively affordable Midwest and East Coast metros, most notably Minneapolis (32.1%), Detroit (30.8%), Philadelphia (29.9%), Virginia Beach, Virginia (29.7%) and Baltimore (28.3%).
In contrast, higher-income homebuyers took up the share of new mortgages that lower-income homebuyers lost in the last several years – nearly half (44.8%) of all new mortgages nationwide went to high-income buyers in 2023, which is nearly identical to the 2018 share. In 2020, higher-income Americans accounted for a low of 41.2% of new mortgages.
Redfin added today’s median-home sale price is about $420,000, up 5% year-over-year, and also up nearly 40% since the start of the pandemic in March 2020 and up nearly 50% since March 2019.
“There was a sweet spot in 2020 when mortgage rates were ultra-low and home prices had yet to skyrocket, allowing some lower-income Americans to break into the housing market,” said Redfin Senior Economist Elijah de la Campa. “But somewhat ironically, the continued strength of the economy has made it harder to afford a home and widened the real-estate wealth gap between rich and poor Americans. The Fed’s interest-rate hikes, meant to help cool inflation and slow a hot economy, have pushed mortgage rates to near their highest level in more than two decades. That’s on top of home prices, which skyrocketed during the pandemic buying boom and have stayed high due to a shortage of homes for sale.”
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