Urban Wire Eighty Percent of Homes on the Market Aren’t Affordable for Households Earning Median Incomes or Less
Jung Hyun Choi, Amalie Zinn
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Home prices have risen substantially above the inflation rate, putting homeownership increasingly out of reach for many Americans. Rising interest rates have slowed home price growth (PDF) but have introduced a new barrier to affordability.

As a result, households earning median incomes or less can afford only 20 percent of homes for sale, compared with the roughly half of homes they could afford in 2016. But affordability varies noticeably across locations, suggesting that a combination of federal and local solutions that target both supply and demand could alleviate cost burdens.

There’s been a steep decline in affordable homes

Despite seasonal volatility, total active listings declined continuously nationwide, from nearly 2.5 million in July 2015 to roughly 830,000 in October 2022, a 66.2 percent drop.

Listings for homes worth less than $350,000 experienced the greatest decline. In July 2015, they composed more than 70 percent of all active listings, compared with less than 35 percent of all active listings in July 2022 and less than 40 percent in October 2022 (the most recent data we have).

Meanwhile, listings for homes worth less than $350,000 dropped from 1.7 million in July 2015 to 319,532 in October 2022. During this period, listings for homes worth between $100,000 and $200,000 declined the most, by more than 18 percentage points. Even after adjusting for overall price increases using Black Knight’s Housing Price Index, we found a noticeable decline in the share of low-price homes.

The sharp rise in interest rates is also increasing the costs of owning

On top of rising home costs, increasing interest rates have made owning less accessible.

To show how rising rates affect the costs of owning, we calculated the monthly principal and interest rate a homebuyer would need to pay for a median-price home (around $450,000). For households that pay a 5 percent down payment, their monthly mortgage payment increases from $1,802 to $2,844 when the interest rate increases from 3 percent to 7 percent. For those who put 20 percent down, the monthly cost increases from $1,518 to $2,395. In both cases, the monthly mortgage payment increases by 58 percent. 

Though rents have also gone up substantially in the past year, the rise in interest rates has made owning more expensive than renting. The median mortgage-payment-to-rent ratio-payment reached 1.46 in September, the highest since the Mortgage Bankers Association began to track this metric in 2009.

Still, affordability varies substantially by location

Affordability has decreased in most markets, but there is noticeable variation. Among the 15 most-populous metropolitan areas, for example, households earning median incomes or less in the Detroit area can afford 46 percent of homes on the market, while in Los Angeles, they can afford less than 2 percent.

Some of these variations can partially be explained by income differences. Though San Francisco has a higher median home value compared with Los Angeles ($1,463,289 versus $954,270), the median income in San Francisco is higher than in Los Angeles ($121,826 versus $77,456), resulting in a higher share of affordable homes for sale in San Francisco.

In general, areas with higher ratios of median home sales prices to median household incomes have lower shares of affordable homes that households with median incomes or less can purchase.

Echoing national trends, we also found listings for homes worth less than $350,000 in Boston, Los Angeles, and Seattle—three of the least affordable areas—had the largest decreases in active listings from 2015 to 2022.

In all the metro areas, total active listings declined from 2015 to 2022, in line with national trends.

Both supply- and demand-side policies are needed to prevent wealth inequality from worsening

As homes become more unaffordable, households with low incomes—who are disproportionately households of color and young first-time homebuyers—will face greater challenges accessing homeownership. Interventions on the housing supply and demand sides can mitigate potential widening wealth disparities by income, race, ethnicity, and generation. 

Both local and federal policies can increase supply. Local policymakers could consider changing zoning ordinances to lower housing costs. Federal policymakers could consider incentives for such local zoning changes. They could also increase funding for the Housing Trust Fund and Capital Magnet Fund to preserve and increase homeownership for families with low incomes and consider expanding the Low Income Housing Tax Credit program to rehabilitate homes for sale. Further, they could improve chattel financing for manufactured homes and make financing for accessory dwelling units less cumbersome.

Solutions that address supply will take time to bear results, so they should be complemented with policies that address demand in today’s market. Policies that address demand should be designed and implemented with great caution in an inflationary environment, because increased demand could further drive up prices, which could mitigate the intended impact.

Targeting policies like down payment assistance programs, assistance to first-generation homebuyers, and special purpose credit programs in areas where there are still some affordable homes, such as Detroit and Philadelphia, could be particularly effective to help struggling homebuyers. Programs that reduce borrowing costs in addition to the amount borrowed could also help in the current economic environment.

As long as home prices and inflation remain volatile, enacting complementary policies that alleviate supply and demand challenges will be critical for ensuring prospective buyers with median and low incomes don’t get boxed out.


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Research Areas Housing finance Housing finance
Tags Housing affordability
Policy Centers Housing Finance Policy Center
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