Here is how much the opportunity to get housing has decreased this year

Here’s how quickly affordability has deteriorated this year for first-time buyers: Their monthly mortgage payment is nearly 60% higher than it was in January.

At the beginning of the year, the median home payment was $1,443 after a 10% reduction. That’s now $2,285, or $842 more per month, calculated exclusively to Yahoo Finance. The fee now eats up 30.2% of a recipient’s monthly household income, or nearly 50% more than in January, when it was just 20.3% of their income.

The story is the same for those with larger down payments thanks to rapidly rising mortgage rates and high home prices. While these factors have calmed some in recent weeks—mortgage payments peaked in late October—affordability is likely to remain a major issue in 2023.

“It will take time for the housing market to stabilize,” Danielle Hale, chief economist at, told Yahoo Finance. “Either mortgage rates need to soften a bit, incomes need to rise, or prices need to adjust a bit to return to something more affordable.”

“Buyers experienced sticker shock”

About a year ago, economists expected the average interest rate on a 30-year fixed mortgage to reach 4% this year. After starting at 3.22% in January, the rate rose to 7% in early November, which Freddie Mac economists described as “the biggest jump in 50 years.”

In June alone, the interest rate rose from 5.23% to 5.78% in one week. The increase of more than half a point was the biggest one-week jump since 1987.

“At one point, I had about 10 people cancel their purchase plans because of rate changes in two weeks,” Jason Sharon, owner and broker at Home Loans Inc., told Yahoo Finance.

The housing market’s Achilles heel was the unprecedented pace of interest rate hikes driven by the Federal Reserve’s fight against inflation. For homebuyers across the country, every percentage point increase has reduced their purchasing power by tens of thousands of dollars.

Terry Straka stands on the porch of his new home as he finalizes details with a real estate agent on September 19, 2022 in Myrtle Beach, South Carolina. (Credit: Madeline Gray for The Washington Post via Getty Images)

“Affordability went $150,000 in the wrong direction,” New American Funding branch manager Scott Sheldon told Yahoo Finance. “Someone who was awarded a $600,000 home in January can now only afford a $420,000 to $430,000 home… This has been a significant blow to people’s financial situation.”

So many buyers simply left the market.

Purchase mortgage applications were down 36% year-on-year in mid-December, according to the latest data from the Mortgage Bankers Association, and demand will remain subdued as buyers face higher borrowing costs.

“In 2022, potential buyers experienced sticker shock,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, told Yahoo Finance. “At the beginning of the year, they thought they knew what it took to buy a home. Then they entered the market and found that the payment was much, much higher because of the rate jump.

“The Housing Market of 2023 May Be No Man’s Market”

As mortgage rates rose this year, so did housing prices, further straining homebuyers’ budgets.

According to, the median home sale price rose from $369,900 in January to $449,000 in June — a 21% increase. While home prices have since softened to $405,000 in December, that’s up almost 10% since January and out of reach for many buyers — especially at a rate of 6.42%.

Only 42.2% of new and existing homes sold between July and September were affordable to households with a median income of $90,000, according to the National Association of Home Builders. This is the lowest share since the Great Recession.

“The overall market is starting to show signs that we can no longer support 7% mortgages,” Sheldon said.

During an open house hosted by Prudential Realtor Tracy Do, interested buyers, realtors and brokers draw a steady stream of visitors in and around this 1920 California Bungalow in Highland Park, listed at $379,000.  (Credit: Allen J. Schaben/Los Angeles Times via Getty Images)

During an open house hosted by Prudential Realtor Tracy Do, interested buyers, realtors and brokers draw a steady stream of visitors in and around this 1920 California Bungalow in Highland Park, listed at $379,000. (Credit: Allen J. Schaben/Los Angeles Times via Getty Images)

Homebuyer affordability could remain at its worst level since 1985 unless sellers adjust their price expectations and mortgage rates fall below 7% next year, economists at independent research firm Capital Economics said.

For now, it seems the sellers remaining in the market are getting the message.

According to, the share of discounted homes rose to 19.6% in November from 9.2% a year ago. About 35% of builders cut their list prices in December as well, down from 36% the previous month, according to NAHB.

“After drowning in the housing frenzy of the recent past, homeowners, sellers, buyers and renters could be squeezed in 2023,” Hale said. “In 2023, the housing market could become a ‘no man’s market’, unfriendly to both buyers and sellers.”

Gabriella is a Personal Finance Correspondent at Yahoo Money. Follow him on Twitter @__gabriellacruz.

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