The U.S. housing market has plenty of homes up for sale, but most everyday buyers still cannot afford them. A new report from the National Association of Realtors and Realtor.com shows that today’s families have access to about one-quarter fewer homes than they would in a normal, balanced market.
To help explain this problem, the groups created a new tool called the Listing-Income Alignment Score. It measures whether the prices of homes for sale actually match what local people earn. A perfect score is 100%, meaning there are plenty of houses available for every income level. Lower scores mean the market is flooded with expensive luxury homes while cheaper, entry-level houses are hard to find.
Right now, the national score is sitting at 74.9%. While that is better than the 66.7% score from last year, it is still much lower than the pre-pandemic normal of 84.4%.
“Housing supply is growing and affordability is improving. However, the U.S. housing market continues to face a structural mismatch between the homes available for sale and what buyers can afford,” said Nadia Evangelou, a lead economist for the National Association of Realtors. “Too much of the inventory available today remains concentrated at higher price points, leaving a shortage of options for entry-level and middle-income buyers. This is preventing home sales from reaching pre-pandemic levels.”
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Middle-income families, who make around $75,000 a year, are feeling the pinch the most. They can only afford about 23% of the homes currently on the market. In a healthy market, they should be able to afford nearly double that amount, or about 44% of listings. Experts say the country needs about 311,000 more homes priced under $261,000 to fix this imbalance.
“The improvement in our Listing-Income Alignment Score over the past year is encouraging, but the data makes clear that more inventory alone won’t be enough to unlock the housing market,” said Danielle Hale, Chief Economist at Realtor.com. “A true recovery requires homes at the right price points. Until the supply of entry-level and middle-market homes grows to meet demand, many buyers will continue to find the market out of reach despite headline improvements in affordability and inventory.”
Where you live makes a huge difference. The Midwest has the most affordable options, where home prices still match local paychecks. The top five most balanced cities are Toledo, Ohio; St. Louis, Missouri; Akron, Ohio; Pittsburgh, Pennsylvania; and Detroit, Michigan.
On the flip side, California is the toughest place for regular buyers. The five most stressful markets with the fewest affordable homes are Los Angeles, California; San Diego, California; Oxnard, California; Providence, Rhode Island; and Boise City, Idaho.
Almost every single major city across the country showed some improvement over the last year. In fact, 99 out of the 100 largest cities either got better or stayed the same. The only place where things actually got worse was Madison, Wisconsin, which dropped nearly eight percentage points. The biggest turnarounds happened in places like Lakeland, Florida; McAllen, Texas; Las Vegas, Nevada; New Orleans, Louisiana; and Cape Coral-Fort Myers, Florida—all areas where home prices had skyrocketed during the pandemic boom but are now slowly starting to realign with what people earn.
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