Lack of affordable houses in the real estate market hits some people the hardest

A sign is posted in front of a home for sale in San Francisco on February 20, 2023.

Justin Sullivan | Getty Images

Even in a housing market that has slowed significantly due to rising mortgage rates, the supply of homes for sale is roughly half of what it was in 2019.

The shortage affects some buyers more than others.

The popular 30-year fixed mortgage rate hovered in the high 6% range in May. At that level, buyers with an annual income of $100,000, slightly above the national median, could afford a house with a maximum price of about $341,000. But only 39% of homes for sale were listed at or below that price point in May, according to a new report Thursday from with the National Association of Realtors.

In a balanced market with supply and demand, 64% of homes should be affordable for buyers earning $100,000 a year, given the size of this population. As a result, the market is currently missing about 285,000 of these listings.

Just five years ago, the same incomes could afford two-thirds of homes for sale. House prices and mortgage interest rates were significantly lower.

The lack of affordable housing increased competition in the market this spring, which reversed the cooling in house prices that started last summer.

“It’s almost a tale of two cities where we have houses under $500,000, they’re certainly selling incredibly fast. Under $350,000 and $400,000 there are multiple offers,” said Noah Herrera, a Las Vegas realtor, during an open house in Las Vegas. middle of May. “Over $500,000, it slows down a little bit.”

In the higher price ranges, there are too many homes for sale for the number of Americans who can afford them. In fact, for every home listing over $680,000, the market is missing twice as many homes under $341,000.

“Ongoing high housing costs and a shortage of available homes continue to present budget challenges for many potential buyers, and that is likely to keep some buyers in the rental market or on the sidelines, delaying their purchase until conditions improve,” said’s chief economist. Danielle Hale.

The expensive existing home market is pushing more buyers into new builds, which ironically used to have a price premium. Housebuilders have offered incentives such as upgrades or temporary mortgage interest reductions. However, these are falling as builders see more demand and get more pricing.

As with everything else in real estate, location is everything. The areas with the largest affordable housing deficit are El Paso, Texas; Boise, Idaho; Spokane, Washington; more Florida markets; and of course Riverside and Los Angeles, California, which are some of the most expensive housing markets in the country.

Areas in the Midwest still have the highest number of affordable homes. The four cities with the largest supply of affordable housing are all in Ohio. They are followed by Syracuse, New York; Pittsburgh, Pennsylvania; and St. Louis, Missouri.

The supply situation does not appear to be improving. New listings of homes for sale in the first week of June fell 25% year over year to the lowest level for any early June on record, according to Redfin.

That lack of new listings has pushed the total number of homes on the market down 5% from the same period a year ago.

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