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NAR Study: It’s Hard to Buy Affordable Homes

Rising home prices and low inventory have made it difficult for lower-income Americans to buy a home – and even more difficult for Black Americans.

WASHINGTON – The surging residential real estate market has led to record-high home prices and record-low inventory, which the National Association of Realtors® (NAR) and realtor.com call “double trouble” in their latest study, The Double Trouble of the Housing Market.

According to NAR, it’s increasingly difficult for consumers – particularly Black Americans – to achieve homeownership.

The report looks at the impact that rapidly escalating home prices and diminishing housing inventory has on housing affordability. Unlike previous affordability research, NAR says it considered affordability for all income groups, accounted for the affordability of homes currently available for sale instead of homes that have already sold, and provided affordability data by race for the 100 largest U.S. metro areas.

Nationally, households earning $75,000 to $100,000 have 400,000-plus fewer affordable homes to choose from compared to the start of the pandemic (245,300 in Dec. 2021 vs. 656,200 in Dec. 2019). That translates into one affordable listing for every 65 households, down from one affordable listing for every 24 households in 2019.

Total home valuation across the U.S. rose by an estimated $8.1 trillion from the first quarter of 2020 through the end of 2021. However, that wasn’t accompanied by a rise in the homeownership rate, which remained steady at about 65%.

“The housing wealth gain has been sizable over the past two years,” says NAR Chief Economist Lawrence Yun. “However, due to the ongoing inventory shortage and rising interest rates, homeownership attainment will become especially challenging unless drastically more housing supply is available.”

For households with higher incomes, some expensive metro areas – San Francisco, San Jose, Washington, D.C., for example – are more affordable than before the pandemic started due to increasing incomes and lower mortgage rates. Since 2019, household incomes rose 15% and 13%, respectively, in San Jose and San Francisco.

However, the impact of the housing market changes affects some income groups more than others. In San Francisco, for example, households earning $100,000 to $125,000 can afford to buy 180 fewer homes now compared to December 2019. For those earning $125,000 to $150,000, there are about 300 fewer affordable homes.

“In general, an increase in salary makes housing more affordable to a buyer. But due to the reductions in inventory over the last few years, today’s buyers in large tech markets can actually afford a smaller number of homes than they could two years ago, despite an uptick in wages,” says Realtor.com Chief Economist Danielle Hale.

Hale says the low inventory problem “is particularly acute for some racial and ethnic groups who have faced greater hurdles to homeownership stemming from, among other things, lower incomes as a group.”

Homeownership gap

According to the study, a significant and persistent racial homeownership gap exists in America. Since 2017, the annual homeownership rate for white Americans has remained above 70%; however, the homeownership rate for Black Americans has been slightly above 40% – nearly 30 percentage points lower.

NAR and Realtor.com’s look at housing affordability by racial group explained the differences in homeownership. Nationwide, 35% of white households and only 20% of Black households have incomes greater than $100,000. Approximately half of all homes currently listed for sale (51%) are affordable to households with at least $100,000 income, though that varies a lot by metro area.

“The homeownership rate has been around 50% for all households in the expensive metro markets, such as Los Angeles and San Francisco, and therefore it’s becoming nearly impossible to afford a home, especially for Black households,” Yun says. “At the same time, there are affordable markets that still provide opportunities to achieve homeownership as inventory at affordable price points is reasonably available.”

NAR and Realtor.com’s study identified the top 10 most affordable U.S. housing markets for Black households:

  • Akron, Ohio
  • Baltimore, Md.
  • Birmingham, Ala.
  • Dayton, Ohio
  • Detroit, Mich.
  • McAllen, Texas
  • Memphis, Tenn.
  • St. Louis, Mo.
  • Toledo, Ohio
  • Youngstown, Ohio

To increase the nation’s housing inventory, NAR advocates for all levels of government to include funding for affordable housing construction; preserve, expand and create tax incentives to renovate distressed properties; convert unused commercial space to residential units; and encourage and incentivize zoning reform.

In addition, NAR says new-home construction should be boosted with an additional 550,000 units a year for 10 years, noting that would create 2.8 million new jobs and generate more than $400 billion in economic activity.

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