How unruly and where the housing market is getting worse

In the first years of the pandemic, backed by record-breaking mortgage fees, the market has been plagued by low supply and high prices since its grand operation in homes.

Prices in March were 39% higher nationally than in March 2019, pre-pandemic, according to the S&P CoreLogic Case-Shiller Index. Prices continue to rise, but supply crunches are finally beginning to be easier, but not in the right price range.

The demand for housing is generally strong, but is the strongest at lower, affordable prices in the market. That segment is still desperately insufficient. As a result, home sales in the lower and mid-price classes continue to perform in the high-end market.

A new report from the National Association of Realtors and Realtor.com breaks down affordability and supply, shedding light on where the issues lie in the market. Affordable prices were determined using standard underwriting guidelines for buyers using a 30-year fixed mortgage. There, 30% of your income is used for monthly payments (mortgages, property taxes, insurance).

A supply of homes for sale that can afford to increase the majority of this year’s income group from earlier this year for those earning between $75,000 and $100,000 a year, considered middle-to-middle-income buyers. In March 2024, 20.8% of the list was out of reach of these households, rising to 21.2% by March of this year. However, in March 2019, these same buyers could afford almost half or 48.8% of all active lists.

According to the report, in the so-called balanced market between buyers and sellers, that group should be able to pay 48% of all lists. Based on current inventory levels, the market requires around 416,000 listings with prices below $255,000 to balance, the study found.

For those who make $75,000 a year, the market is not even supplied. Home buyers with a salary of $50,000 can purchase just 8.7% of the listings available in March, but 9.4% and 27.8% in March 2019.

High-income households have almost all access to the housing market. Home buyers who earn more than $250,000 can afford at least 80% of their household listings.

“Shoppers are seeing more homes for sale today than they were a year ago. Many of these homes have been added in a medium income price range,” says Daniel Hale, Chief Economist at Realtor.com. “But as this report shows, we still don’t have a wealth of affordable homes for low- and medium-income people.”

Hale added that inventory progress is not uniform across the country, with profits concentrated in the Midwest and South.

The report is a national snapshot, but all the properties are local.

Midwest markets, like Akron, Ohio. St. Louis; Pittsburgh is balanced and is considered to be sufficient supply to meet demand. Others have made great strides and added a list of more affordable prices, but they are still shy about meeting demand. These include Raleigh, North Carolina. Des Moines, Iowa; Grand Rapids, Michigan.

However, more than 40% of the country’s 100 largest metropolitan markets are still struggling. These include Seattle and Washington, DC, but while affordable home supply is growing in both markets, households need to make more than $150,000 a year to buy even half of the available homes.

Other markets that were overheating are finally cooling. Austin, Texas. San Francisco; and Denver has seen a significant increase in affordable home supply. They are now above pre-pandemic levels.

“With the right combination of new construction, market changes and local policy efforts, we see that even some of the most challenging markets can begin to bending towards balance,” according to the author of the report.

And there is a market that is getting worse. Many of these are found in Southern California, including Los Angeles and San Diego. New York City falls into that category. The report cites several factors, including decades of foundation, limited supply of land that can be constructed, high construction costs, limited zoning methods and rapid transitions.

Home builders are trying to build more affordable homes, but their costs could be higher and even higher amid the tariffs and new immigration policies. Single-family homes began in March, nearly 10% lower than the same month a year ago.