The National Association of Realtors, or NAR, recently released a report entitled “The ‘Double Trouble’ of the Housing Market” detailing the obstacles would-be homeowners are experiencing as we move forward into 2022. The report takes a look at not only the biggest issues facing home shoppers, like prices and inventory, but also which demographics are most affected.
The gist of it? It’s a seller’s market – as it has been for at least the last five years – but now it’s worse than ever (unless you’re a seller, that is).
Prices on the Rise
For those of you browsing Zillow in your free time, you may have noticed that home prices have spiked in the last couple of years – and not just a little.
Since 2019 alone, the average home price in America has risen a whopping 30%, according to the report. That translates to an average home price increase of nearly $80,000 – a jump few could have predicted that’s pushing many families and individuals out of the house hunt.
Rising rent costs are also an issue. With half of all renters already paying more than 30% of their income in rent, it’s no wonder the vast majority are unable to afford a home. NAR reports that for about 66% of renters, purchasing a home is off the table.
From writing heartfelt letters to sellers to completely waiving inspection fees, buyers still in the game are doing their best to make compelling offers, with little success.
Inventory in Trouble
A compounding factor to the price issue is scarce inventory. Although the housing market was already facing a shortage in pre-pandemic times, inventory reached a record low in 2021.
The United States has about 1 million different housing properties available for purchase right now, a measly 25% of the total properties listed 15 years ago. Fewer options means more competition.
Location, Location, Location
Of course, price and inventory vary by city. For homebuyers in the $50,000-$75,000 income bracket, the highest number of affordable properties rank as follows:
- Des Moines, Iowa
- Detroit, Michigan
- Augusta, Georgia
- Youngstown, Ohio
- Scranton, Pennsylvania
Buyers in the $75,000-$100,000 income bracket will face the most challenges along the west coast of California in cities such as San Jose, San Diego, Los Angeles, Ventura, and Thousand Oaks.
An already existing racial disparity in homeownership has persisted into 2022. While white Americans have reported a 70% rate of homeownership since 2017, the rate of homeownership for Black Americans is somewhere around 40%.
This gap in affordability is linked directly to a difference in income – 35% of white households make at least $100,000 per year, while only 20% of Black households report earning that much.
Among the most affordable markets for Black households are Akron, Ohio, and Memphis, Tennessee. Meanwhile, Hispanic homebuyers will have the best luck in cities such as Toledo, Ohio, and Baltimore, Maryland.
As we’ve said before, buying a house is not particularly easy in a “normal” market (what even is normal anymore?). So hearing that the market is more competitive than it’s been in decades isn’t particularly reassuring.
If you want our takeaway: Now might be a good time to push pause on your home-buying plans and spend the next year or so saving up more for a down payment. The housing market has to cool off at some point, right?
If you want to get started on a savings plan for your house, check out Lasso. It’s an app that makes it easy to build a plan for your financial goals and get access to meaningful advice to improve upon it.
If you’re already a Lasso user, take some time to play around with your plan for your house down payment and see what another year would do for your savings.