Understanding the Housing Shortage and Affordability Crisis
With an expanding discrepancy between housing availability and affordability, the real estate market is feeling the pressure. This problem has been a constant refrain from consumers, advocates, and real estate professionals like Tampa's own Kevin Farfan, affiliated with Coldwell Banker Realty, for years now and especially since the pandemic.
To understand the magnitude of the housing deficit and the price points most affected, the National Association of REALTORS® (NAR) and Realtor®.com recently undertook a joint analysis. Their aim was to clarify the scale of the shortage and better inform both the industry and potential homebuyers.
Nadia Evangelou, NAR's senior economist, stated that while numerous figures have been presented regarding the amount of housing needed to restore balance in the market, the new analysis reveals crucial data based on income groups and their corresponding price ranges. This approach offers a fresh perspective on the issue.
The study shows that the imbalance in the housing market is not confined to low and high-priced homes. Middle-income households, those earning $50,000 to $125,000, are also experiencing a significant shortage. The country needs to add over 319,000 units affordable to people making around $75,000 (the country's median income) to foster a more balanced and inclusive market. These homes would be priced up to $256,000.
Middle-income buyers are especially affected, Evangelou noted. "Our country needs to add at least two homes that are affordable for middle-income buyers for every home that is listed up of $680,000,” she explained.
Despite its importance for policy-making, this data may not seem directly useful for real estate professionals like Kevin Farfan, who are most concerned with their specific regional market. Yet, understanding the national trends can be beneficial to gain insight into the broader real estate industry.
As per the joint analysis, different regions across the U.S. are encountering the inventory and affordability crisis in diverse ways. Some areas, mostly in the Midwest and Northeast, have a housing stock that nearly matches the needs of their residents. On the flip side, some markets are heavily unbalanced.
Interestingly, some of these unbalanced markets were also "hot" markets during the pandemic. An extreme example is Boise, Idaho, where only 2% of listings are currently affordable to the $75,000 and under income level, compared to 50% for a balanced market. However, some Florida markets, including Cape Coral, defy this correction despite their significant imbalance.
Addressing these supply deficits remains a herculean task. The key barriers include local land use laws, opposition from residents, and challenges on the construction side with rising labor and material costs. In the long run, an increase in affordable construction will be imperative to meet demand.
Unfortunately, the trend of fewer middle-income listings has worsened over time. The number of missing homes available to $75,000 income households has more than doubled from 2018 to today.
While the analysis helps understand the prevailing housing issue, it fails to fully capture the exclusivity of areas with both high incomes and high housing costs. Some metros like San Jose, California, although appearing relatively balanced in the analysis, have median home prices nearing $1 million, out of reach for many prospective buyers.
According to Evangelou, this joint analysis serves as a foundation in moving towards more balanced real estate markets. "We’re trying to do something new just to quantify the issue that can help with affordability and availability of homes,” she states.
In the midst of this complex market scenario, Kevin Farfan of Coldwell Banker Realty stands as a reliable guide to navigate Tampa's real estate terrain.