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Housing Affordability Crisis: Middle-Class Homeownership Increasingly Out of Reach

Housing Affordability Crisis: Middle-Class Homeownership Increasingly Out of Reach

Apr 20, 2024

Housing Affordability Crisis: Middle-Class Homeownership Increasingly Out of Reach

Recent data from a comprehensive study by Creditnews Research has revealed a stark decline in housing affordability for middle-class households in the United States. The study, which assessed the relationship between income distribution and housing costs across the country's 100 most populous metropolitan areas, found that in 2024, middle-class households could afford to buy an average home in just 52 of these metros—a significant drop from the 91 metros deemed affordable in 2019.

The situation appears even bleaker for those in the lower middle class, who can now afford to buy a home in only 7 of the largest 100 metros. According to the study, "41 out of the 100 metros require a gross annual income of $100,000 or more to qualify for an average home. In 13 metros, an average income of more than $155,000 is needed."

The study defined affordability based on the principle that monthly housing and mortgage costs should not exceed 28% of a household's gross income. Ali Wolf, chief economist of Zonda, commented on the changing reality for the middle class: "In the past, if you were middle class, it was almost assumed you would become a homeowner. Today, the aspiration is still there, but it is a lot more difficult. You have to be wealthy or lucky."

This shift in affordability has been exacerbated by a combination of factors, including elevated mortgage rates, high home prices, and a lack of inventory. The National Association of Realtors' director of real estate research, Nadia Evangelou, highlighted the particular challenges for middle-income buyers, saying, "Middle-income buyers face the largest shortage of homes among all income groups, making it even harder for them to build wealth through homeownership."

Adding to the affordability challenges, mortgage rates have seen a recent uptick. Freddie Mac reported that 30-year fixed-rate mortgages reached 6.88% in the week of April 11, with rates climbing above 7% at one point. HousingWire lead analyst Logan Mohtashami noted, "As mortgage rates increase, it’s never good news for the housing market, especially when more sellers are in the mix."

The study's senior analyst, Sam Bourgi, summarized the findings by stating, "There’s no two ways about it: Housing affordability has worsened significantly since Covid," and that "the middle class today isn’t what it was even as recently as just a few years ago."

As of now, the most affordable areas for middle-class homebuyers are primarily located in the Midwest, Rust Belt, and parts of Texas, while the West Coast, Tri-State Area, and Hawaii remain largely unattainable. The study's findings underscore a worrying trend that could have profound implications for the American Dream of homeownership and the financial well-being of future middle-class families.

The Creditnews Research study paints a challenging picture for middle-class households aspiring to homeownership. With affordability plummeting and market pressures persisting, the dream of owning a home is becoming increasingly elusive for many Americans.

Creditnews Article

Creditnews Study


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