ShareMortgage rates started the new year near the 6.5% threshold. According to Freddie Mac, the 30-year fixed mortgage rate rose to 6.48% from 6.42% in the last week of 2022. Although rates are more than double a year ago, rates will likely stabilize below 6% in 2023 as inflation will continue to slow down in the following months.
But who can afford to buy a home now? Shifting buyer demographics may have vast implications for the real estate market in the upcoming years.
With the qualifying income near the $100,000 threshold, 32% of all households and 15% of all renters can currently afford to buy the median-priced home. Most of these eligible households are Gen Xers as their median age is 51, they are married couples (73%), they have earned at least a bachelor's degree or higher educational attainment (61%), and most of them live in the big city centers such as New York, Los Angeles, and Chicago, where housing is even more expensive. While sellers typically live in their homes for about 10 years, most of these eligible households have already spent nearly 13 years in their homes. This could be an indicator that some of them may decide to purchase a home soon.
Looking at affordability conditions by race/ethnic group, nearly half of Asian Americans can afford a median-priced home, followed by White Americans (35%). In contrast, 24% of Hispanic and less than 20% of Black Americans can accomplish the American Dream. While housing affordability will be the main driver of the real estate market in 2023, Black Americans may fall further behind on homeownership.
