The U.S. needs to not just build more new homes, but build more new homes that are affordable to most people, according to a new report from the National Association of Realtors and Realtor.com.
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The nation needs to not just build more new homes, but build more new homes that are affordable to middle-income buyers, according to a new study from the National Association of Realtors and Realtor.com released Thursday.
The Housing Affordability & Supply Report estimated how many homes are missing from the U.S. housing market by income level. The report found that the market was missing about 320,000 home listings valued up to $256,000, which is the top home value the report’s authors estimated middle-income buyers — households earning up to $75,000 — could afford.
“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, in a statement.
“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.”
The report notes that there were about 1.1 million homes available for sale at the end of April, up 5 percent from a year ago. If the market were balanced, the nearly 51 percent of households earning $75,000 or less would be able to afford to buy 51 percent of the homes available for sale. But those households can currently only afford 23 percent of listings now, whereas five years ago, they could afford to buy half of all listings, according to the report.
“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 said. “Our country needs to add at least two affordable homes for middle-income buyers for every home listed for upper-income buyers.”
There are fewer listings missing at higher income levels, according to the report.
“For instance, buyers earning $250,000 can currently afford to buy 85% of the listings compared to 93% in a balanced market,” the report said.
The report calculated the number of listings missing by income level for the 100 largest metro areas and found that 96 percent had a for-sale inventory shortage of homes that buyers earning $75,000 could afford to buy. Among the 100, El Paso, Texas; Boise, Idaho; and Spokane, Washington, had the fewest affordable homes available for middle-income buyers while three Ohio cities – Youngstown, Akron and Toledo – had the most, according to the report.
“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 in a statement.
“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.”