Shortage of affordable homes in real estate market hits hardest

A For Sale sign is displayed in front of a home for sale on February 20, 2023 in San Francisco, California.

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 about half of what it was in 2019.

The shortage is hitting some buyers more than others.

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

In a balanced supply and demand market, 64% of homes should be affordable to buyers earning $100,000 a year, given the size of this population. As a result, the market is currently short of around 285,000 of these ads.

Just five years ago, these same wage earners could afford two-thirds of the houses for sale. House prices and mortgage rates were significantly lower.

The lack of affordable homes has heated competition in the market this spring, reversing the decline in home prices that began last summer.

“It’s almost a story of two towns where we have homes under $500,000, they’re selling incredibly fast. Under $350,000 and $400,000 there are multiple offers,” Noah said. Herrera, a real estate agent in Las Vegas, at an open house in mid-May. “Above $500,000 it slows down a bit.”

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

“High housing costs and the scarcity of available homes continue to present fiscal challenges for many potential buyers, and this is likely keeping some buyers in the rental market or on the sidelines and delaying their purchase until conditions improve. ‘improve,’ said’s chief economist. Danielle Hale.

The expensive existing home market is pushing more and more buyers towards new construction, which ironically had a higher price tag. Homebuilders offer incentives such as temporary mortgage rate upgrades or buyouts. These, however, are declining as builders see more demand and gain more pricing power.

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

Midwestern regions continue to have the most affordable housing. The four cities with the most affordable housing are all in Ohio. They are followed by Syracuse, New York; Pittsburgh, Pennsylvania and St. Louis, Missouri.

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

This lack of new listings caused the total number of homes on the market to drop 5% from the same period a year ago.

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