With more and more buyers taking to the sidelines, listings of houses that can be considered affordable by median-income buyers are mounting, according to the latest report from Zillow. Yet, even so, overall affordability has not improved for most buyers.
At the end of July, about 439,000 houses that were listed for sale were affordable to a median-income household, the popular listing site says. That’s the most since August 2022 and 20% higher than a year ago.
The growth in affordable listings stems largely from the overall growth in inventory that has “slowed price growth,” Zillow noted.
More houses were for sale in July than in any month since November 2019. Total inventory is up 18% from a year ago.
“Getting the typical U.S. home affordable to a median-income household would take much more” than a modest drop in house prices. —Zillow report
But despite the higher count, less than a third of July’s listings were considered affordable. That’s roughly in line with July a year ago, but “far below” July 2020, when more than half of all houses for sale were considered affordable.
At the same time, the typical mortgage payment has more than doubled in the past five years, keeping many renters from making the leap to ownership.
To be considered affordable, a buyer would have to spend no more than 30% of his or her earnings on the total monthly housing-related payment, including mortgage, taxes, insurance, and maintenance.
Zillows says a slight bump in brand new affordable listings — up to 34% in July from 32% a year earlier — is “a signal” that it’s not just stale “leftovers” that are making up the pool of affordable places for sale. A stale listing is one that has been on the market for 60 days or more.
The uptick is also a sign that sellers “may be adjusting to today’s more buyer-friendly environment” by pricing their houses more competitively to help buyers over the hump.
While the housing market is becoming friendlier to buyers just about everywhere, the transition, notably, is happening at different speeds in different regions. “Affordability looks very different depending on where you live,” according to Zillow.
Major coastal markets typically have the smallest share of affordable listings, while the most buyer-friendly markets can be found across the Sun Belt.
‘Much More’ Needed To Impact The Affordability Problem
Looking ahead, Zillow’s outlook calls for only modest affordability gains. The company expects house values to slip by about 1% this year, hardly enough to move the needle.
“Getting the typical U.S. home affordable to a median-income household would take much more” than a small drop in house prices, it says. “Mortgage rates would need to drop to 4.43% or home values would need to fall 18%.”
And those scenarios, it adds, are likely only if there’s a serious economic slowdown or heavy job losses — neither of those being particularly desirable outcomes. The only real path forward is to build more homes, Zillow argued.
“The nationwide housing deficit has grown to 4.7 million homes, which is the root of the affordability crisis,” it stated. “Policies that allow more homes to be built more quickly can help.”
