Report: U.S. Housing Market Needs More Than 300,000 Affordable Homes for Middle-Income Buyers
Real Estate In-Depth | June 8, 2023
WASHINGTON—The U.S. housing market is short more than 300,000 affordable homes for middle-income buyers, according to a new analysis released today by the National Association of Realtors and Realtor.com. The country’s persistent housing inventory crunch impacts middle-income buyers more than any other income bracket.
NAR and Realtor.com’s housing affordability and supply report examines the number of listings missing by price range in the current market when compared to a balanced market. A balanced market is defined as when half of all available homes fall within the price range affordable for middle-income buyers.
“Middle-income buyers face the largest shortage of homes among all income groups, making it even harder for them to build wealth through homeownership,” said Nadia Evangelou, NAR senior economist and director of real estate research. “A two-fold approach is needed to help with both low affordability and limited housing supply. It’s not just about increasing supply. We must boost the number of homes at the price range that most people can afford to buy.”
At the end of April 2023, approximately 1.1 million homes were available for sale, an increase of five percentage points from one year ago. However, the market is missing almost 320,000 home listings valued up to $256,000, the affordable price range for middle-income buyers or households earning up to $75,000. Middle-income buyers can afford to buy less than a quarter (23%) of listings in the current market. Five years ago, this income group could afford to buy half of all available homes.
“Ongoing high housing costs and the scarcity of available homes continues to present budget challenges for many prospective buyers, and it’s likely keeping some buyers in the rental market or on the sidelines and delaying their purchase until conditions improve,” said Realtor.com Chief Economist Danielle Hale. “Those who are able to overcome affordability constraints may be increasingly drawn to newly constructed homes or to the suburbs and beyond, both of which may offer buyers more realistic opportunities for homeownership in the near term.’
Among the 100 largest metro areas, El Paso, TX; Boise, ID and Spokane, WA have the fewest affordable homes available for middle-income buyers. Three Ohio cities—Youngstown, Akron and Toledo—have the most affordable homes available for that income group.
“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,” Evangelou added. “Our country needs to add at least two affordable homes for middle-income buyers for every home listed for upper-income buyers.”
The report noted that the housing shortage is less severe in higher-priced listings. Homes that cater to higher income levels are seeing fewer listings missing. For instance, buyers earning $250,000 can currently afford to buy 85% of the listings compared to 93% in a balanced market.
In terms of race, middle-income blacks are suffering the most from the housing shortage. The report states, “Parsing out by racial/ethnic groups, the lack of listings affordable to middle-income buyers is even larger for minority groups. While more Black and Hispanic Americans earn an income lower than $75,000 than their white counterparts, there are also significant housing affordability and availability inequalities among racial/ethnic groups. Black Americans are the group that is further away from equilibrium than any other group.”
The report noted that while nearly 66% of Black Americans earn $75,000 or less, these buyers can only afford 22% of homes for sale. In contrast, 48% of white Americans earn that same income, and they can also afford to buy 22% of the listings. Thus, Black Americans would need 20% more listings with a value of up to $256,000 than their white counterparts in order to be at equilibrium. Hispanic Americans follow with about 11% more homes available for sale needed than what white Americans need in order to have enough homes listed on the market that they can afford to buy.
The National Association of Realtors is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.
Realtor.com is operated by News Corp. subsidiary Move, Inc.