Low-income borrowers lose pandemic-era mortgage market share

Strength of economy, rising rates and prices widen real estate wealth gap

Have low-income households lost the homebuying headway they made during the pandemic-era housing boom? New figures from Redfin suggest that might be the case.

Per a Redfin analysis of Home Mortgage Disclosure Act (HMDA) data, low-income buyers made some progress at the beginning of the pandemic, taking out 23.2% of all new mortgages in 2020.

That momentum, however, has since dissipated due to high home prices and heightened mortgage rates denting affordability, with the low-income share of new mortgages dropping back down to 20.6% last year. That’s roughly where it was pre-pandemic in 2018.

High-income borrowers, meanwhile, are “more prepared to weather the storm of high prices and rates,” as Redfin put it, and as both have risen, so has the high-income share of new mortgages. The high-income borrower share dropped to an all-time low of 41.2% in 2020, according to Redfin’s analysis, but that rebounded to 44.8% in 2023 — almost exactly to the same level it was in 2018.

“There was a sweet spot in 2020 when mortgage rates were ultra-low and home prices had yet to skyrocket, allowing some lower-income Americans to break into the housing market,” said Elijah de la Campa, senior economist at Redfin. “But somewhat ironically, the continued strength of the economy has made it harder to afford a home and widened the real estate wealth gap between rich and poor Americans.

“The Fed’s interest-rate hikes, meant to help cool inflation and slow a hot economy, have pushed mortgage rates to near their highest level in more than two decades. That’s on top of home prices, which skyrocketed during the pandemic buying boom and have stayed high due to a shortage of homes for sale.”

Some metros, particularly affordable cities in the Midwest, still have larger shares of new mortgages issued to low-income earners. For example, 32.1% — nearly a third — of new home loans in Minneapolis last year went to low-income families. That’s the highest share among the 50 largest metros in the country, followed by Detroit (30.8%); Philadelphia (29.9%); Virginia Beach (29.7%); and Baltimore (28.3%). Conversely, just 1.9% of new mortgages issued in pricey Anaheim, California, went to low-income households, the smallest percentage among metros evaluated by Redfin.

Just three of the metros tracked by Redfin saw low-income households gain mortgage market share from 2020 to 2023: Cleveland (27.8%, up 1.4 percentage points), Chicago (27.7%, up 1.2 percentage points), and Washington, D.C. (27.1%, up 0.3 percentage points).


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