Cities Ranked from Best to Worst for Low-Income Homebuyers

Homebuying has become increasingly challenging for lower-income Americans due to soaring home prices and mortgage rates, leading to a housing affordability crisis in 2023. According to a report by Redfin, only 26% of new mortgages in 2023 were issued to low-income Americans, down from 31% in 2020. High-income earners, on the other hand, accounted for nearly half of the new mortgages in 2023, compared to 41.2% in 2020. The Midwest and some East Coast metros still remain relatively affordable for low-income earners, with cities like Detroit, Philadelphia, Minneapolis, and Cleveland having higher percentages of new mortgages issued to this demographic. In contrast, California metros and Miami had the lowest percentages of new mortgages issued to low-income earners.

In 2023, homebuyers with the typical local income had to spend over 80% of their pay on monthly housing costs to buy a median-priced home in cities like San Francisco, Los Angeles, and San Diego. Detroit and Pittsburgh, on the other hand, were the most affordable cities for homebuyers. The pandemic initially created a favorable environment for homebuyers with low interest rates and a temporary dip in home prices. However, home prices surged during the pandemic buying surge and have remained high due to the housing shortage. The Federal Reserve’s interest rate hikes in 2022 and 2023 further exacerbated the situation by pushing mortgage rates to near their highest levels in more than two decades.

Home buying affordability hit an all-time low in 2023, with a median U.S. income earner having to spend up to 41.4% of their earnings on monthly housing costs to afford a median-priced home. Despite the challenges, rising home prices and mortgage rates show no signs of easing. The median home sale price has risen to $420,000, up 5% from the previous year and around 40% since the beginning of the pandemic. Mortgage rates have reached 7.2%, more than double the low of 2.7% in 2021, leading to a record-high monthly mortgage payment of $2,886. The general down payment required for a home purchase at a 20% rate has increased to $84,000 in 2023, up 5% from the previous year.

Overall, the housing affordability crisis in 2023 has made it increasingly difficult for lower-income Americans to buy homes, with high home prices and mortgage rates creating barriers to homeownership. The widening wealth gap between rich and poor Americans has been further exacerbated by these trends. Despite some cities being more affordable for low-income earners, the overall trend indicates a challenging environment for homebuyers. Efforts to address housing affordability issues and provide support for lower-income homebuyers will be crucial in the coming years to improve access to homeownership opportunities for all Americans.