In a recent report released on Thursday, real-estate brokerage Redfin has highlighted the alarming reality that the majority of Americans are unable to afford homes listed for sale in the United States. An analysis conducted on listings from 97 of the most populous metropolitan areas across the country has revealed that just 15.5% of homes for sale in 2023 were affordable for the typical U.S. household. This marks a decline from the previous year when Redfin found that 21% of homes listed for sale were within reach of the average buyer.

Redfin determines affordability based on the estimated mortgage payment not exceeding 30% of the average monthly income of residents in a given county. Unfortunately, Redfin is not the only real estate company highlighting the issue of housing affordability. The National Association of Realtors stated earlier this year that only 23% of the homes listed for sale in the U.S. were affordable for middle-income households, defined as those with annual earnings of up to $75,000.

The situation becomes even more dire when considering the research conducted by real estate data provider ATTOM. Their analysis of median home prices in approximately 575 U.S. counties revealed that home prices in 99% of those areas were unaffordable for the average income earner, defined as someone making $71,214 per year.

This lack of affordable housing can be attributed to multiple factors. One such factor is the limited supply of homes available for sale. Realtor.com reported in June that the number of homes for sale in 2023 had decreased in 21 out of the 50 largest metropolitan areas compared to the previous year. Homeowners were reluctant to list their properties due to a surge in mortgage rates, with fears of having to buy a new home at rates exceeding 7%, more than double the usual rate during the pandemic.

Despite these challenges, there is some silver lining heading into the next year. Realtor.com reported a 7.5% year-over-year increase in housing inventory in November. This rise in inventory is expected to create more competition among buyers, potentially leading to a decrease in home prices.

Furthermore, there is a positive development in the mortgage market as rates are slowly dropping after reaching their highest level in over two decades this fall. According to Freddie Mac, the 30-year fixed-rate mortgage remained below 7% for the second consecutive week. This downward trend has prompted potential homebuyers, who were previously on the sidelines, to re-enter the market, and homebuilders are responding to the heightened demand by increasing new home construction.

As the struggles of Americans to afford homes continue, the housing market is at a critical juncture. Efforts must be made to address the shortage of affordable housing options and nurture a thriving real estate market that caters to the needs of all income levels.