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Why Americans earning $50,000 to $100,000 are pessimistic about homebuying

·2-min read

Homebuyer sentiment is plummeting amid America’s housing affordability crisis. The red-hot market which has seen housing prices rise at a record pace is not keeping up with the incomes of millions of working Americans. According to Google, the question “when is the housing market going to crash?” has been trending in search, up 2,450% in March, as Americans have been reckoning with the housing affordability crisis.

The median household income was $68,703 in 2019, according to the Census Bureau. While median income rose 6.8% from $64,324 in 2018, housing prices have skyrocketed. The median home list price hit a record high of $375,000 in April, a 17.2% year over year increase, according to Realtor.com.

Fannie Mae’s national housing survey indicates that Americans earning $50,000 to $100,000 are particularly pessimistic about homebuying. “If you’re a family making even two minimum wages, there are almost nowhere in the country where you can afford an apartment on the usual benchmark of paying no more than 30% of your income on housing,” Habitat for Humanity CEO Jonathan Reckford told Yahoo Finance. “And we’ve got over 16 million families in America paying over half their income on housing.”

Habitat for Humanity is a non-profit that focuses on affordable housing for low-income families. The affordability crisis, though, is also hitting middle-class families whose incomes would disqualify them from participating in the organization’s and many government funded homebuying programs.

According to analysis by mortgage-finance giant Freddie Mac, the housing market is falling short of demand for single-family homes by 3.8 million units.

“We are losing housing that is affordable for low and moderate income families faster than we’re creating it,” said Reckford. “And so right now, as people have been called to shelter in place this year, I think it’s really put a spotlight on the fact that for so many people, they have no adequate place in which to shelter.”

While the Federal Reserve made the decision on April 28 to keep interest rates in the record low range of 0% to 0.25%, the benefit to homebuyers is muted.

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While the average interest rate for a 30-year mortgage is 3%, homebuyers are no longer jumping at the opportunity to buy a home and capitalize on low interest rates. Mortgage applications are down 0.9% for the week ending April 30, 2021 compared to the prior week, according to data from the Mortgage Bankers Association.

As home prices remain out of reach for millions of working Americans, Reckford says solving America’s affordability crisis requires some math.

“It starts with, how do we build more housing across the entire spectrum? Habitat for Humanity’s niche is affordable home ownership, but we need more rental housing, we need more of every kind of housing that is affordable. And the math doesn’t work right now.”

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