U.S. Housing Affordability has been declining since 2021 and has plagued the nation. This is a complete reversal from the prosperity the U.S. experienced during the Trump Administration where income exceeded the qualifying income to buy a median priced home. A closer examination of the Affordability Indexes in the four U.S. regions reveals disparities to the extent of the decline based on geography. The disparities in these Affordability Indexes were significant enough to call for closer examination.
The current Affordability Indexes reported by National Association of Realtors (NAR) for the Northeast, Midwest, South, and West were 84.3%, 119.2%, 97.9%, and 68.6%. Interestingly, the regions that fared the worst are in the deep blue West and Northeast regions run predominantly by Democrats. The flyover nation of the Midwest and the South run mostly by Republicans still fair relatively well considering how inflation has overtaken our nation. However, no region has been immune to the loss in Housing Affordability.
Local and state leadership matters, but the monetary policies of the Federal government that result in supply/demand shocks, higher prices passed on to consumers, and low consumer confidence will eventually have significant negative impact on all Americans regardless of if you are in a red or blue state or town. In just 3 and a half short years, we have seen how quickly Housing Affordability has fallen due to inflation and the high interest rate which led to a depleted inventory supply and soaring home prices. We cannot remain on this trajectory or else it will lead to a total collapse. For this reason, elections have consequences.
Presidential elections are determined by electoral votes focused predominantly on the battleground states which include Pennsylvania, Wisconsin, Michigan, Nevada, Georgia, and Arizona. Let’s take a closer look at the housing market in these battleground states.
Pennsylvania
Pennsylvania has a housing rental crisis. The National Low Income Housing Coalition is reporting a huge shortage of affordable rental housing for low-income Pennsylvania households.1 Pennsylvania has a shortage of about 267,000 affordable housing units for low income renters, which means for every 100 low income renters there are only 38 units available to them. The state received across 67 counties housing and community funding from 2018 to 2021. Yet, from 2022 to 2032 Pennsylvania is projected to lose about 35,000 rental units.2 Furthermore, a huge number of households spend more than half of their income on housing making housing unsustainable during the inflationary period3 with 30% at risk of eviction orforeclosure.
The Pennsylvania Association of Realtors is reporting that “51% of Millennials are actively saving for a home”, but “77% said their rent is so high, it’s hard to save enough for a home.” It’s reported that 74% of millennials say debt is inhibiting their ability to save for a home. Confidence among millennials is also down where they don’t feel ready to buy a home even if they had the money.
The current Pennsylvania Association of Realtors Housing Report for July 2024 reports “new record high median home sales price” that has risen about 7% over July 2023.
Similarly, the Pennsylvania average home price for July 2024 was about $271,000 which has risen 4.7% over the past year. At the end of 2020, the average home price was about $213,000 and skyrocketed from 2021 to date to this record high of $271,000 or 27%.
Wisconsin
The Wisconsin Realtors Association reported in June 2024 that housing affordability hit an “all-time low”. In May 2024, the affordability index was 118, decreasing 11.3% from May 2023. Wisonsin’s affordability indexes were tracked from 2009 and it is reported that high mortgage rates and limited supply inventory of homes have lead to this drastic decline to all-time lows from 2021.
From 2021 to 2024, the Wisconsin median home price increased 27% from $241,000 to $305,000. This is the highest increase reported since the data that is available from 2007. Inflation is clearly causing a rise in the home prices and continuing to strain the affordability of homebuyers.
Michigan
The Michigan Data Portal reports that median home values in 2021 were $172,000 and had risen 17% to $201,000 in just one year.
The Michigan housing market report for July 2024 has an average home price of about $250,000 which has risen 5.1% over the past year. At the end of 2020, the average home price was about $192,000 and skyrocketed from 2021 to date to this record high of $250,000 or 30%.
Affordability index data was limited for Michigan. The chart on the Michigan Data Portal for renters’ affordability shows that renter’s are not earning enough to afford median rent - $39,000 median income versus $42,000 median rent.
Nevada
The Nevada housing market report for July 2024 has an average home price of about $445,000 which has risen 6.1% over the past year. At the end of 2020, the average home price was about $328,000 and skyrocketed from 2021 to date to this record high of $445,000 or 36%.
The housing affordability indexes available for Nevada are in Las Vegas-Henderson Paradise areas. From 2016 until the end of 2021, the affordability indexes were all above 100%, ranging from 112% to 151%. At the end of 2022, the affordability index was 75.6%, dropping by 32.44%
Georgia
The Georgia housing market report for July 2024 has an average home price of about $334,000 which has risen 3.8% over the past year. At the end of 2020, the average home price was about $232,000 and skyrocketed from 2021 to date to this record high of $334,000 or 44%.
The rental market in Atlanta for low- and middle-income families is experiencing the fastest rent increases in the country. By October 2023, rents had increased 38% since 2018. In the same time frame, the median home list price in Atlanta rose 65%. The federal Reserve Bank of Atlanta measured the housing affordability and concluded that the Atlanta metro area fell below the “affordability threshold for the first time in more than a decade…”
Arizona
The Arizona housing market report for July 2024 has an average home price of about $433,000 which has risen 3.2% over the past year. At the end of 2020, the average home price was about $316,000 and skyrocketed from 2021 to date to this record high of $443,000 or 40%.
The Pheonix-Mesa-Scottsdale Housing Affordability Index was 88.1% as of August 2023 which is a 28.61% decrease from August 2022.
Arizona made the list as one of the 10 least affordable states for homebuyers. As per data compiled by BestBrokers, “Arizona’s 2023 had a median home value $428,492 which is 6.9 times the income per capita of $62,091.”
The inflation crisis does not pick and choose which states or areas to target, it is a disaster that has huge economic impacts on everyday Americans way of life. The current Administration has allowed inflation to get out of control. Under the Trump Administration, affordability was high, and the quality of life and cost of living was much improved as evidenced by the housing data. Housing as a basic necessity is now out of reach for many whether looking to buy or rent a home. Americans need to ensure that whoever they elect in their local and state governments understand the current economic climate and are fiscally responsible and support initiates to curb inflation. The Presidential election is heavily weighted on the battleground states. It is important for the voters of those states to be empowered with the housing market data and see the decline that we have seen in the last 3 and a half years leading to dissatisfaction and loss in confidence. Confidence can be restored with a return to prosperity of the Trump years when policies were implemented to promote a healthy economic system of low inflation and a healthy housing market.
September 8, 2024
By Sophia Georges
Copyright 2024 - Realsophy Real Estate, Sophia Georges
