Housing has become so unaffordable that over 75% of homes on the market are too expensive for middle-income buyers
- 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.
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.