The US housing market is grappling with a severe shortage of affordable homes, leaving many potential buyers struggling to find suitable properties within their price range. According to a recent report from the National Association of Realtors (NAR) and Realtor.com, the shortage is particularly acute for middle-income households, defined as those earning up to $75,000 annually. The lack of available listings below $256,000, the affordable price range for this income bracket, is exacerbating the problem.
The Shrinking Inventory and Affordability Crisis
The housing inventory shortage in the US has been a growing concern for years, but it has been further exacerbated by the real estate frenzy fueled by the pandemic. The result is a significant dearth of available homes in the affordable price range for middle-income buyers. According to the NAR and Realtor.com report, there is a staggering shortage of approximately 320,000 listings under $256,000. This means that only 23% of the current listings across the US are within reach of middle-income buyers, a significant drop from around 50% just five years ago.
Factors Contributing to the Crisis
The affordability crisis is a complex issue influenced by multiple factors. One key factor is the reluctance of current homeowners to sell their properties, as they are benefiting from historically low mortgage rates. This hesitation to move further limits the supply of available homes. Additionally, elevated mortgage rates and persistently high prices are making it increasingly challenging for potential buyers to enter the market. To afford half of the homes currently on the market, buyers would need to have an annual income of at least $125,000. However, the report highlights that even a slight increase in the number of homes listed has not alleviated affordability concerns.
Impact on Prospective Buyers
The shortage of affordable homes has created a significant obstacle for aspiring homeowners, particularly those with modest incomes. The report emphasizes that achieving homeownership remains a distant dream for many middle-income households. Even for those below the national median household income of approximately $75,000, homeownership rates have reached a record high of over 53%, according to Census data. However, the scarcity of affordable options not only hinders their ability to buy a home but also poses challenges in building long-term wealth.
Addressing the Issue
To tackle the affordable housing crisis, experts argue that increasing the supply of homes within the price range of middle-income buyers is crucial. Nadia Evangelou, director of real estate research at NAR, emphasizes the need to boost the number of affordable homes to ensure broader accessibility for prospective buyers. The report also highlights that geographic disparities exist, with some regions experiencing more acute shortages than others. Areas such as El Paso, Texas; Boise, Idaho; and several Florida markets are among the most affected, while Midwest cities like those in Ohio have a higher number of affordable homes available.
Bottom line: The US housing market is grappling with a severe shortage of affordable homes, leaving middle-income buyers struggling to find suitable properties. The lack of available listings below $256,000 is exacerbating the crisis, with only 23% of current listings within reach of these buyers. Factors such as homeowners’ reluctance to sell and elevated mortgage rates contribute to the problem, while geographical disparities further compound the issue. Addressing the affordable housing crisis requires a concerted effort to increase the supply of affordable homes and ensure broader accessibility for prospective buyers, thus allowing more Americans to achieve the dream of homeownership and build long-term wealth.