U.S. Needs About 320K Affordable Homes for Middle-Income Buyers

​Middle-income Americans are facing a shortage of affordable home options in the US, according to a new report from the National Association of Realtors.

The groups estimate the country needs about 320,000 homes priced at up to $256,000 that would serve those earning up to about $75,000 per year.

“The country’s persistent housing inventory crunch impacts middle-income buyers more than any other income bracket,” according to the report.

These buyers can afford only about 23% of the homes listed today and “five years ago, this income group could afford to buy half of all available homes,” the report indicated.

Among the 100 largest metro areas, El Paso, Texas; Boise, Idaho; and Spokane, Wash. have the fewest affordable homes available for middle-income buyers. Conversely, three Ohio metro areas – Youngstown, Akron, and Toledo – have the most.

“Ongoing high housing costs and the scarcity of available homes continue to present budget challenges for many prospective buyers, and it’s likely keeping some buyers in the rental market or on the sidelines and delaying their purchase until conditions improve,” Realtor.com® Chief Economist Danielle Hale said in prepared remarks.

“Those who are able to overcome affordability constraints may be increasingly drawn to newly constructed homes or to the suburbs and beyond, both of which may offer buyers more realistic opportunities for homeownership in the near term.”

Joseph Rubin, Senior Advisor at EisnerAmper, tells GlobeSt.com that the continuing inflationary pressures on construction materials and wages have made it next to impossible to build affordable homes even before factoring in higher interest rates.

Doug Ressler at Yardi’s Matrix tells GlobeSt.com that regulatory costs account for 40% of multifamily development costs and “high-cost jurisdictions seem oblivious to this.”

Additionally, Rubin said, “Existing middle-income homeowners won’t give up their lower mortgage rates to move up, decreasing the availability of starter homes. Until inflation and mortgage rates moderate, there will be continued excess demand for single-family rentals. As a result, the SFR market is on fire.”

Sean Rawson, co-founder, Waterford Property Company, tells GlobeSt.com that the “missing middle” is the most difficult segment of the population to provide new housing for because of the lack of dedicated funding sources.

“Most of the middle-income housing stock in the US is Naturally Occurring Affordable Housing (NOAH) but that housing stock is starting to age, and we are losing more units each year than we are producing,” Rawson said.

“To alleviate the housing shortage local governments across the country, need to look at creative funding sources to help create more rent-restricted middle-income housing.”

John Hunt, principal and chief analyst of MarketNsight, tells GlobeSt.com, that local governments should also consider how zoning is affecting homebuyers of all ages.

“There is a way to build quality, affordable communities, but restrictive or exclusionary zoning – limiting smaller single-family homes, townhomes, and innovative mixed-density product types – is driving down inventory and driving prices up,” Hunt said.

Kurt Carlton, president and co-founder at New Western, a national private real estate investment marketplace, tells GlobeSt.com that the last census showed that there are as many as 16 million vacant homes in the US, “so the homes are there, many are just not in a condition where the typical buyer would purchase them. These are the homes our investors are seeking out, rehabbing, and selling at more affordable price points.

“The National Association of Homebuilders has forecasted that 830,000 homes will be built this year, but what goes wildly underreported is that there are expected to be 350,000 home flips, mainly involving vacant and uninhabitable homes that are being revitalized by independent rehabbers. Making up about one-third of the net new inventory.”

Brian Lichtenberger at Markerr tells GlobeSt.com the US homeownership cost to income ratio at 36%. Out of the top 100 MSAs, only 22 markets fall below the 30% affordable mark, while 14 are extremely cost burdened at over 50%.”

Alexander McGee, Co-Founder, Prime City, tells GlobeSt.com that when middle-income buyers are priced out of the market, it hampers their ability to accumulate wealth, restricts their options for upward mobility, and contributes to inequality.”