Affordable Housing: Middle-Income Buyers Gain Ground, But Challenges Persist
Middle-income earners find housing costs decreasing, yet challenges persist due to ongoing supply constraints.
Looking to purchase a home? Affordability and supply have been persistent hurdles for many Americans.
The latest report from the National Association of Realtors (NAR) and Realtor.com reveals that the housing market has experienced minor improvements, but the issue of low supply persists.
While there's been evidence of increased inventory since March 2024, the report indicates that affordability remains out of reach for many potential buyers.
Among the various income groups examined, middle-income buyers have seen a notable increase in the share of properties within their reach. With an annual income of $75,000, these buyers managed to secure a 0.4 percentage point increase from March 2024 to the present, escalating from 20.8% to 21.2%.
However, even with this growth, they fall significantly short of the shares they should be able to acquire in a balanced market. The NAR estimates a deficit of over 415,900 affordable homes for this income group[1].
"Middle-income buyers face the largest shortage of affordable listings," NAR Senior Economist, Nadia Evangelou, explained in an interview with FOX Business[1]. This group achieves the most significant growth while confronting the largest gap, creating what Evangelou refers to as the "middle-income paradox."
Upper-middle-income buyers have also seen an increase, with their share of affordable properties rising by 0.2 percentage points, reaching 37.1%. Yet, they still face a sizable deficit in accessible and affordable homes.
It's disheartening to learn that lower-income buyers have not improved their position in accessing available homes. In fact, the report shows that multiple income brackets have seen shrinkage in the share of listings they can afford. For instance, homebuyers with an income of $50,000 have experienced a 0.7 percentage point decrease in the proportion of up-for-sale properties they can manage[5].
With interest rates remaining stable as Freddie Mac announced[5], the question remains: How do we bridge this housing affordability gap, particularly for middle-income buyers?
Results from the report suggest several possible solutions:
- Smaller Homes: There's been a noticeable trend among homebuilders focusing on creating smaller homes[1]. This could provide a more extensive range of choices and prices that middle-income buyers would find affordable.
- Zoning Law Changes: Adjusting zoning laws to allow for smaller, more modest homes may better match new construction with what buyers can afford[1].
- Supporting Builders: Offering incentives and support to homebuilders can help expand the supply of affordable homes[1].
- Access to Financing: Improving access to financing tools such as down payment assistance programs can make homes more affordable for this income group[1].
- Imbalance in Supply: The report emphasizes the need for an increase in listings under $255,000 and below $340,000 to bridge the affordability gap[5].
By implementing these strategies, we can align new construction with what middle-income buyers can afford and reach a more balanced housing market. The NAR and Realtor.com's 2025 Housing Affordability & Supply report also explores the current situation in the largest metropolitan areas and states.[PLACEHOLDER]
- The persistent challenges in the housing market, as revealed by the National Association of Realtors (NAR) and Realtor.com, involve a significant deficit of affordable homes for middle-income buyers, particularly in a balanced market.
- The report indicates that while upper-middle-income buyers have seen a slight increase in their share of affordable properties, they too face a sizable deficit in accessible homes.
- In contrast, lower-income buyers have not seen improvements in accessing available homes, with multiple income brackets experiencing shrinkage in the share of listings they can afford.
- To bridge the housing affordability gap and reach a more balanced market, the report suggests strategically building smaller homes, adjusting zoning laws, offering incentives to homebuilders, improving access to financing tools, and increasing the supply of listings under specific price points.
