Although people in the Atlanta area wanting to buy a home still faced record-high home prices in 2024, for the first time in four years housing affordability improved rather than worsened, according to a new report by the real estate brokerage firm Redfin.
It is still tough out there for people hoping 2025 could be the year they finally own a home. According to an analysis published Monday, the median sale price of $397,948 in metro Atlanta in 2024 means a household on the median income of $93,843 would still face a monthly payment of $2,711, or 34.7% of their income.
Even so, this is an improvement compared to 2023, when the share of income for mortgage was about 35.3%. By Redfin’s metrics, it’s the first time in four years that housing affordability got better in metro Atlanta.
In 2020, the share of the median household income needed to buy the typical home in Atlanta was about 22%. In 2019, it was about 23%.
Compared to other major metros, homebuying is still within reach for many middle-income families in the Atlanta region, said Redfin’s Chief Economist Daryl Fairweather. In Anaheim, California, a household earning the median income of $121,925 would need to spend 76% of their income to afford the median-priced home of $1.166 million.
“Most people who are buying a home are probably above the median. Most people below the median earner are still renting,” Fairweather said. “Above $100,000 in Atlanta, you could find a home that meets that criteria. That makes it at least relatively affordable.”
Redfin suggested wage growth was behind its findings, which it said had outpaced the increases in monthly housing payments. But even though there has recently been an uptick in inventory, the firm expects prices to continue to rise in 2025 because there are not enough homes on the market to meet demand.
Fairweather said the outlook is still challenging for first-time homebuyers, especially if they have a lower down payment.
“For those people in particular, whatever gains they’ve had in income in the last year aren’t enough to make up for how unaffordable the housing market has gotten over the last five years,” Fairweather said.
Redfin said its analysis assumed a 15% down payment, principal, interest of 6.72%, taxes and insurance. The firm analyzed data through November.
According to the U.S. Department of Housing and Urban Development, households are cost-burdened if they spend more than 30% of their household income on mortgage payments or rent. A household is severely cost-burdened if it spends more than 50%.
In major metros in the United States, it is challenging to stay below that 30% threshold, according to housing and financial experts.
Homebuyers in Atlanta and elsewhere have had to factor in higher interest rates and home prices, and a lack of supply. Estimates vary, but there is a shortage of between 4 million and 7 million homes, according to The Pew Charitable Trusts. In the Atlanta area, the shortage of affordable homes could be as high as 100,000, according to a recent analysis by Up for Growth, a coalition of housing advocacy groups.
While average Atlantans would need to spend roughly 35% of their household income to afford the median-priced home, the report found the picture was bleaker nationwide where the average household would need to spend about 42% of their income to buy the typical home in 2024.
Though the reasons for the inventory shortage are myriad and complex, part of the problem has been the lock-in effect created by the rise in interest rates to combat inflation. That means many people are staying put rather than selling their homes.
Another report published by the real estate brokerage firm on Tuesday found more than a third of homeowners in the U.S. said they would never sell their home. One-third of respondents cited current home prices and borrowing costs.
That sentiment was pronounced among older Americans, with 43% of baby boomers saying they’ll never sell.
The report found that home prices had increased 40% since before the COVID-19 pandemic, and that the weekly average mortgage rate is 6.91%. In 2019, the average mortgage rate was under 4%.
In 2019, the median home sale price in metro Atlanta was $248,597, according to Redfin data. It was up by 60% as of last year, at $397,948.
John Ryan, the chief marketing officer with Georgia Multiple Listing Service, said because affordability in the Redfin report showed a drop by the slimmest of margins, it was unlikely to represent a trend that would “move the needle.”
“I think we’ll see a lot of the same going into 2025 because we’re still thousands of homes short of inventory,” he said. “I don’t see house prices dropping anytime soon.”
For that reason, he said now could be as good a time as any for buyers to enter the market, provided they are financially able to do so. He noted that in comparison to the beginning of 2024, the inventory of active residential listings was 48% higher at the end of the year. That should give first-time homebuyers more options, he said.
According to Fairweather, one “silver lining” is that new construction in the rental market is dampening demand and stabilizing rents.
“For those who feel like they can’t afford to buy a home right now, at least they’ll be able to rent another year without having to worry so much about their rent being jacked up,” the economist said.
