Buying a house is the hardest it’s been in nearly 30 years

See what affordability looks like where you live

Published June 17, 2023

Housing affordability is at the lowest levels the United States has experienced since 1996.

This line is the benchmark for whether a typical US household has enough money to cover the mortgage payment when buying a home.

If housing affordability is above this line, it means that the median US household taking out a new 30-year mortgage on a typically-priced house has enough income to afford at least 100% of a monthly payment.

When affordability falls below this line, it means that the typical American household can cover just a portion of a new monthly payment.

For 13 years, affordability at the national level stayed above the line — from December 2008 through January 2022, according to the Goldman Sachs Housing Affordability Index.

In 2021, US housing affordability started to plummet, falling below the 100 line in February 2022 for the first time in more than 10 years, before reaching a record low in October 2022.

Although affordability has begun to improve over the last few months — as home prices cooled and mortgage rates dropped a bit — current levels are still among the lowest we’ve seen, even lower than in the years before the Great Recession in the 2000s.

In March, a typical American household couldn’t afford all of a new mortgage payment, according to the latest data made available by Goldman Sachs. Their projections show that the United States won’t return to a point where the typical American can cover all of a new mortgage payment until 2025 or later.

The Goldman Sachs US Housing Affordability Index is based on three factors — household income, housing prices and mortgage rates. While incomes have been rising, that hasn’t been enough to offset the recent surge in mortgage rates, combined with strong growth in home prices over the past few years.

“The primary driver is still the fact that you face the most significant and abrupt increase in mortgage rates in many decades,” said Lotfi Karoui, chief credit strategist at Goldman Sachs.

As mortgage rates increase, affordability drops

Historically, mortgage rates and US housing affordability have had an inverse relationship — as rates increase, housing becomes less affordable. For example, affordability peaked in late 2012 as mortgage rates plummeted in the years after the US Great Recession, then dropped again when rates began to climb back up in 2013 (1).

In the years leading up to the pandemic and through 2020, a steady fall in mortgage rates led to higher levels of affordability (2). Mortgage rates began to skyrocket in late 2021, topping out at 7.08% in October — the same month affordability fell to a record low — and again in November, according to average weekly rates from Freddie Mac (3).

“Housing is the most rate-sensitive sector of the economy,” Karoui told CNN. “That's the first sector where you feel the pinch from rising rates.”

Buying is now much less affordable than renting

Although rents have also been rising, renting is now much more affordable than buying in the face of high mortgage rates. Rent takes up about a quarter of the average American’s monthly income, while new mortgage payments now eat up more than a third.

Renting was more affordable than buying for most of the 2000s. And until recently, buying had been more affordable since the aftermath of the Great Recession.

While there is a wide range of affordability in metro areas across the country, they largely follow the national trend because mortgage rates are similar for new buyers nationwide, Karoui said.

This is the first period where the percentage of expensive US metro areas is higher than affordable ones — since 2005-07 in the lead up to the housing crisis. From 2009 through 2021, housing was affordable in at least 70% of the 340 metro areas that Goldman Sachs tracks. The number of unaffordable metro areas peaked in October, just as affordability bottomed out nationally. Less than half of those 340 metro areas were considered affordable in March.

Most of the variation you see between metro areas comes down to home prices, Karoui told CNN.

“There could be some differences in terms of disposable income, some states are doing better than others,” he said. “But I would say the biggest driver is the extent to which you had appreciation in terms of prices in the year prior to that, that's really what makes it simple.”

For example, all five of the least affordable metro areas in the country are in California, where home values are some of the highest in the country. All of its metro areas were below the national affordability rate in March, according to Goldman Sachs data.

The West has the highest concentration of less affordable areas, particularly in California. Florida also stands out for metros with less affordable housing, as well as most of the East Coast. Metro areas in the Midwest are generally more affordable, as well as pockets of the South, such as parts of Texas.

In fact, all but one of the metro areas in the West were considered unaffordable in March, according to Goldman Sachs data. While metro areas in the Northeast and South are largely split, more were expensive than affordable. The Midwest is the most affordable region in the country, with 70 metro areas where the median American household can fully afford the monthly payment on a new mortgage.

Illinois stands out for affordability in the Midwest. The two most affordable metro areas in the country are both in central Illinois — former industrial hubs, Danville and Decatur. In March, all of Illinois’ metro areas were more affordable than the national average — including Chicago.

Most of the 25 largest decreases in affordability between December 2021 — just after mortgage rates began to rise — and December 2022 were in Florida, Georgia and the Carolinas.

Every single metro area that Goldman Sachs indexes dropped in affordability over that period. Three of the five metro areas with the largest drop in affordability were in Florida, including Ocala, Naples and the Miami area.

Explore the data

See how these 340 metro areas compare to the national average and to each other by using the search box at the top of the chart.