House-hunting today can feel challenging due to the limited supply of homes for sale. If this has been your experience, and you're having difficulty finding a home that ticks all your boxes, it's
The US Housing Market and The Middle-Income Buyers: A Deep Dive
Dated: June 12 2023
Equity Real Estate is aware of the changing dynamics of the housing market, particularly in relation to middle-income buyers. This segment of the population has been heavily impacted by recent market conditions, and Equity Real Estate believes that addressing these issues is vital for the health of the overall real estate market.
In a report from the National Association of Realtors® and Realtor.com®, it was estimated that the US housing market is short of more than 300,000 affordable homes for middle-income buyers. These are households earning up to $75,000 a year, and the affordable price range for these buyers is $256,0001.
The US housing market's landscape has been transformed over the past few years. Market statistics indicate that inventory continues to be tight going into 2023, with higher interest rates than we saw during the pandemic due to the Federal Reserve increases. A mix of low inventory, housing prices, and repeat buyers showing up with cash could keep some buyers squeezed1.
In 2022, the median home price rose to $386,300, up 10.2% from a year ago. Housing inventory fell from a monthly average of 1.6 million units in 2019 to 1 million in 2022, and home values and sales prices have risen 32% in the past two years. These factors contribute to the affordability issues experienced by middle-income buyers1.
An interesting aspect of these shifts is the changing demographics of home buyers. As Millennials step into homeownership roles, Baby Boomers seem ready to unload their homes for the right price. Millennials make up the largest share of buyers at 43%, with Baby Boomers and Gen Xers making up 29% and 22% of recent buyers, respectively1.
Meanwhile, the median household income for first-time buyers fell to $71,000, a significant drop from the previous year's $86,500. This decline further exacerbates the affordability issue for middle-income buyers, particularly those entering the market for the first time1.
This shortage of affordable homes is not evenly spread across the US. Some areas, such as El Paso, Texas; Boise, Idaho; and Spokane, Washington, have the fewest affordable homes available for middle-income buyers. In contrast, some Ohio metro areas, such as Youngstown, Akron, and Toledo, have the most affordable homes available for this income group.
The path forward requires a comprehensive approach to address both low affordability and limited housing supply. It's not just about increasing supply; we must also boost the number of homes at the price range that most people can afford to buy.
As we look forward to an expected return of inventory to a monthly average of 1.5 million units or higher in 2024, the industry should prioritize strategies to encourage the creation of more affordable homes for middle-income buyers. These steps could include incentivizing builders to produce more entry-level homes and implementing policies that improve affordability for first-time and middle-income buyers.
At Equity Real Estate, we understand the complexities of the current housing market and are committed to helping our clients navigate these challenging times. We believe in the power of homeownership to build wealth and are here to help middle-income buyers find affordable options that meet their needs. With the right strategies and policies in place, we can work together to address the shortage of affordable homes and create a more balanced and inclusive housing market.
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