Homeownership is becoming an increasingly distant dream for many middle-and-low-income families, as a recent study by the National Association of Realtors (NAR) and Realtor.com indicates that these families can only afford a fraction of the homes in the 100 largest US cities. According to the analysis, households earning $75,000 or less, which make up 51% of the US population, could only afford 23% of the listings on the market in April.
The housing shortage in some cities is even more acute, with several cities in California having the lowest share of affordable homes based on a $75,000 median household income. The maximum home price for each market is an estimate of what median income earners can afford, based on available listings, a 14% down payment, and a 6.4% mortgage rate.
In San Jose, Sunnyvale, and Santa Clara, not a single affordable home is available for those earning $75,000 or less, while other cities in the state are only marginally better off. The Seattle and Austin areas also face an extreme deficit of affordable housing. Overall, the US needs at least 2 million more home listings to meet the current demand, says Nadia Evangelou, a senior economist at NAR who co-authored the study.
#New: Homes people earning the median US income ($75,000/yr) can afford to buy:
— scott budman (@scottbudman) June 15, 2023
San Jose: 0%
Sunnyvale: 0%
San Diego: 0.6%
San Francisco: 1%
Oakland: 1%
Berkeley: 1%
Los Angeles: 1.2%
Source: @realtordotcom @nardotrealtor
Although residential construction has picked up since spring 2020, the country's long-standing housing shortage is likely to persist "for years," according to several estimates cited by CNBC. This continued shortage will place upward pressure on home prices, making it even more challenging for middle- and low-income families to access homeownership. This is compounded by rising mortgage costs, with mortgage rates nearly doubling since the Federal Reserve began raising interest rates in March 2022.
