Real EstateAgentBlack Homeownership

The housing market’s “double trouble”

Record high home prices and low inventory wreak havoc on home affordability for Black Americans in particular

The housing market is facing a “double trouble.” Record high home prices and record low inventory is making it increasingly difficult for Americans, and particularly Black Americans, to achieve homeownership, according to a study by the National Association of Realtors and released Monday.

“The housing wealth gain has been sizable over the past two years,” NAR chief economist Lawrence Yun said in a statement. “However, due to the ongoing inventory shortage and rising interest rates, homeownership attainment will become especially challenging unless drastically more housing supply is available.”

Since the start of the pandemic, typical home values have risen $80,000 or 30%. Overall, the total home valuation across the country is estimated to have risen by $8.1 trillion form the first quarter of 2020 through the end of 2021. This increase in real estate values, however, was not accompanies by a rise in homeownership as the overall ownership rate remained at roughly 65%.

In addition, rental prices surged 14% year over year in December 2021, making it increasingly difficult for renters to afford their monthly rental payments. The study found that one in two renters pay more than 30% of their income in rent. In some areas, rising rents have inspired renters to purchase a home, as their mortgage payment is less than their current rent, but, according to the study, two out of three renters still cannot afford to buy a home.

For households earning $75,000 to $100,000 there are 400,000 fewer affordable homes available for sale when compared to the start of the pandemic, with only 245,300 affordable listings in December 2021 compared to 656,200 listings in December 2019. In 2019 there was one affordable listing for every 24 households in the $75,000 to $100,000 income bracket and in 2021 there was one affordable listing for every 65 households.

The metro areas with the most homes for sale for households earning $75,000-$100,000 include Deltona, FL; Des Moines, IA; August, GA; Atlanta, GA; McAllen, TX; Baton Rouge, LA; Miami, FL; Virginia Beach, VA; Youngstown, OH-PA; Scranton, PA.

In some expensive housing markets like San Francisco, San Jose, Honolulu, and Washington, D.C., homes are surprisingly more affordable for households with higher incomes than they were before the start of the pandemic due to increasing incomes and lower mortgage rates. In San Jose and San Francisco, household incomes have risen 15% and 13% respectively since 2019.

Despite this increase in relative affordability, there are fewer homes on the market as a result of the record-low inventory. In San Francisco, households earning $125,000 to $150,000, there are about 300 fewer affordable homes available than in December 2019.

“In general, an increase in salary makes housing more affordable to a buyer. But due to the reductions in inventory over the last few years, today’s buyers in large tech markets can actually afford a smaller number of homes than they could two years ago, despite an uptick in wages,” chief economist Danielle Hale said in statement. “The low inventory challenge is particularly acute for some racial and ethnic groups who have faced greater hurdles to homeownership stemming from, among other things, lower incomes as a group.” 

Approximately half of all homes currently listed (51%) are affordable to households with at least $100,000 income. Nationwide, 35% of white households, 48% of Asian American households and 20% of Black households have incomes greater than $100,000.

Substantial variations in affordability exist from one local housing market to the next. For example, Bridgeport, CT, Charleston, SC, Minneapolis, MN-WI, Portland, ME and San Francisco, CA are some of the areas with the biggest gap of affordability between white and Black households. In these areas, white households are twice as like to afford to buy a home compared to Black households.

The study found that Akron, Ohio; Baltimore, Md.; Birmingham, Ala.; Dayton, Ohio; Detroit, Mich.; McAllen, Texas; Memphis, Tenn.; St. Louis, Mo.; Toledo, Ohio; and Youngstown, Ohio are the top 10 most affordable housing markets for Black households, meaning that in these metros Black Households can afford to buy homes roughly in proportion to their income distributions.

However, across the country a racial homeownership gap still exists. The annual homeownership rate for white American has remained above 70% since 2017, but the homeownership rate for Black Americans still sits at slightly above 40%.  

“Moreover, the homeownership rate has been around 50% for all households in the expensive metro markets, such as Los Angeles and San Francisco, and therefore it’s becoming nearly impossible to afford a home, especially for Black households,” Yun said in statement. “At the same time, there are affordable markets that still provide opportunities to achieve homeownership as inventory at affordable price points is reasonably available.”

In order to increase the nation’s affordable housing inventory, the NAR is advocating that all levels of government include funding for affordable housing construction; preserve, expand and create tax incentives to renovate distressed properties; convert unused commercial space to residential units; and encourage and incentivize zoning reform. By expanding new-home construction by an additional 550,000 units a year for 10 years, the NAR says 2.8 million new jobs would be created and more than $400 billion in economic activity would be generated.

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