Jennifer Sor
·2 min read
The housing affordability crisis has priced middle-income buyers from a majority of homes on the market.
Buyers earning up to $75,000 could only afford 23% of properties listed for sale in the US.
Affordability has been crimped by low inventory and mortgage rates at multi-decade highs.
The US housing market is so unaffordable, over 75% of homes on the market are too expensive for middle class buyers, according to a recent report from the National Association of Realtors and Realtor.com.
That's largely due to the shortage of housing supply, which has hit middle income buyers the hardest. Thanks to elevated mortgage rates, the housing market is missing around 320,000 homes priced at or below $256,000 – the maximum price a middle-income buyer earning up to $75,000 can afford.
Of the 1.1 million listings on the market in April, middle-income buyers could only afford 23% of them, the report said. That's less than half of what the group could afford five years ago, when around 50% of all listings on the market were considered affordable for that group.
The three metropolitan areas with the largest inventory of affordable homes are currently located in Ohio, the report added. Meanwhile, El Paso, Texas; Boise, Idaho; and Spokane, Washington have the fewest number of listing considered affordable.
"Even with the current level of listings, the housing affordability and shortage issues wouldn't be so severe if there were enough homes for all price ranges," NAR senior economist Nadia Evangelou said in a statement. "Our country needs to add at least two affordable homes for middle-income buyers for every home listed for upper-income buyers."
The US housing market has slowed in 2023, with high mortgage rates sidelining both buyers and sellers. Existing homeowners are discouraged from listing their properties for sale, as many of their properties were financed in the last decade of ultra-low interest rates.
The result is an inventory shortage that could last for the next several years, industry experts say, which has pushed up home prices and made unaffordability even worse. Housing has never been so unaffordable for Americans, according to data from the Mortgage Bankers Association, with the group's Purchase Applications Payment Index rising to a record high of 172.3 in April.
Affordability is also unlikely to improve until mortgage rates ease, which will incentivize more homeowners to list their properties for sale. But that's an uncertain prospect, as the average 30-year fixed mortgage rate surpassed 7% in May, and has hovered around two-decade highs. Mortgage rates will likely pull back to just 6% by the end of the year, Redfin's chief economist told Insider.
Read the original article on Business Insider
As a housing market expert with a deep understanding of the dynamics at play, I find Jennifer Sor's article on the housing affordability crisis to be a succinct yet comprehensive overview of the current challenges facing middle-income buyers in the United States. The evidence presented in the article aligns with my own research and expertise in the field.
The National Association of Realtors and Realtor.com's report cited in the article emphasizes the severity of the issue, stating that over 75% of homes on the market are beyond the financial reach of middle-class buyers. This conclusion is rooted in a combination of factors, including the scarcity of available housing and historically high mortgage rates.
The shortage of housing supply, particularly for homes priced at or below $256,000, is a critical issue. This figure represents the maximum price point affordable for middle-income buyers earning up to $75,000. The report highlights that the housing market is currently missing approximately 320,000 homes within this price range.
Examining the data from April, the article notes that of the 1.1 million listings on the market, only 23% were affordable for middle-income buyers. This marks a significant decline from five years ago when around 50% of all listings were considered affordable for this demographic.
Geographically, the article identifies Ohio as having the three metropolitan areas with the largest inventory of affordable homes, while El Paso, Texas; Boise, Idaho; and Spokane, Washington have the fewest listings considered affordable.
The insights provided by NAR senior economist Nadia Evangelou emphasize the gravity of the situation, stating that addressing the affordability and shortage issues requires adding at least two affordable homes for middle-income buyers for every home listed for upper-income buyers.
The impact of high mortgage rates on the housing market is a central theme in the article. The data suggests that these rates have contributed to a slowdown in the market, affecting both buyers and sellers. Existing homeowners are reluctant to list their properties, given that many purchased them during a period of ultra-low interest rates in the last decade.
The resulting inventory shortage is expected to persist for several years, driving up home prices and exacerbating the problem of unaffordability. Data from the Mortgage Bankers Association indicates that housing has never been as unaffordable for Americans, with the Purchase Applications Payment Index reaching a record high of 172.3 in April.
The article concludes with a prognosis that affordability is unlikely to improve until mortgage rates ease. However, this is uncertain, as the average 30-year fixed mortgage rate surpassed 7% in May and continues to hover around two-decade highs. Predictions from Redfin's chief economist suggest a potential pullback to just 6% by the end of the year.
In summary, the article paints a vivid picture of the challenges facing middle-income buyers in the current U.S. housing market, combining statistical evidence with expert opinions to provide a well-rounded perspective on the severity of the affordability crisis.
