Middle-income buyers are facing the largest shortage of homes according to a report from the National Association of Realtors. Yahoo Finance Housing Reporter Rebecca Chen details the causes of the ongoing housing shortage for low-income families.
For more of our special coverage on Real Estate: The New Reality, click here.
Video Transcript
DIANE KING HALL: As part of our week-long series, "Real Estate-- The New Reality," we're taking a look at inequality in housing availability. A study out from the National Association of Realtors shows that middle-income buyers are experiencing the largest affordable home shortage in 2023.
Here to explain is Yahoo Finance Housing Reporter Rebecca Chen. Rebecca, let's break this down.
REBECCA CHEN: So we are seeing a huge housing shortage in the nation right now. But this data has shown us that middle-income families are seeing the pain the most. So there are about 51% of families in the US that are making $75,000 or less. But there are only 23% of house things that are affordable and available to these families.
What that means is, if two of these households within this income bracket goes house hunting, one or more than one of them will come out empty-handed. Or they're forced to buy something that's more expensive and that's out of their budget.
So in addition to what we're seeing for that, we're also seeing that this inequality has really been worse in the last five years. So in 2018, there was still about 50% of housing available to middle-income families. But today, in 2023, that number is shaved off by more than half to just 23%.
BRAD SMITH: Wow. So what's caused the imbalance in the market and a shift in housing inequality here?
REBECCA CHEN: So there's really a couple of major reasons. So we can start from the supply side. We have really been underbuilding houses in this market since the Great Recession for the last decade. But what is being built right now is not really what is needed. Meaning, that a lot of developers, they focus on the higher-end luxury product because that's what makes sense for them profit-wise and for the profit margin.
And on side of the demand, on top of family formation that has happened in the last couple of years, the Great Migration is also causing an issue. What that means is, families that are moving from these more expensive cities to the lower-cost places, they're really driving up prices in the traditionally more affordable places. But what it hasn't done is, it hasn't really lower prices enough in expensive cities.
So it's really causing a shift overall in prices across the nation. And what we are also seeing is, of course, borrowing cost has really gone up a lot. So a house that used to be affordable for a family may not be affordable anymore, just because interest rate is so high today.