A sign is posted in front of a home for sale in San Francisco on February 20, 2023.
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 what it was in 2019.
The shortage hits some buyers harder than others.
The popular 30-year fixed-rate mortgage rate hovered in the high 6% range in May. on this level, Buyers with an annual income of $100,000, slightly above the national median, could afford a home with a top price of about $341,000. But only 39% of homes for sale were listed at that price or below in May. according to a new report Thursday by Realtor.com with the National Association of Realtors.
Given the population, in a balanced supply and demand market, 64% of homes should be affordable for buyers making $100,000 a year. As a result, the market is currently missing about 285,000 of these offerings.
Just five years ago, the same earners could afford two-thirds of the homes for sale. House prices and mortgage rates were significantly lower.
The lack of affordable homes intensified competition in the market this spring, reversing the slowdown in home prices that began last summer.
“It’s almost a tale of two cities where we have houses under $500,000 that are selling incredibly fast. There are multiple listings under $350,000 and $400,000,” said Noah Herrera, a Las Vegas real estate agent, during an open house in mid-May. “It slows down a bit above $500,000.”
In the higher price brackets, there are too many homes for sale for the number of Americans who can afford them. In fact, for every home listed above $680,000, twice as many homes under $341,000 are missing from the market.
“Persistently high housing costs and the shortage of available housing continue to pose financial challenges for many potential buyers, and some buyers are likely to remain in the rental market or hold back and delay their purchase until conditions improve,” said Realtor.com chief economist Danielle hello
The expensive existing real estate market is pushing more and more buyers to buy new buildings, which ironically used to be associated with a higher price. Builders offer incentives such as home improvements or temporary mortgage interest buybacks. However, these are declining as builders are seeing higher demand and gaining more pricing power.
As with everything else in real estate, location matters. The areas with the largest deficits in affordable housing are El Paso, Texas; Boise, Idaho; Spokane, Washington; several markets in Florida; and of course Riverside and Los Angeles, California, which are among the most expensive real estate markets in the country.
Midwestern areas continue to have the most affordable housing. The four cities with the greatest supply of affordable housing are all in Ohio. It is followed by Syracuse, New York; Pittsburgh, Pennsylvania; and St Louis, Missouri.
The supply situation does not appear to be improving. New listings of homes for sale in the first week of June fell 25% year over year to an all-time low in early June, according to Redfin.
This lack of new listings has caused the total number of homes on the market to decrease by 5% compared to the same period last year.