Since the onset of the COVID-19 pandemic, the housing market has experienced significant fluctuations. Initially driven by historically low mortgage rates, the market saw a surge in demand which led to a dramatic increase in home prices. As of March this year, housing prices were 39% higher than they were in March 2019, according to the S&P CoreLogic Case-Shiller Index. While there has been some easing of the supply shortage, the available homes are not aligning well with the price points most needed by buyers. Demand for housing remains robust, particularly in the lower and more affordable segments of the market. Unfortunately, this is also where the supply is most lacking. Consequently, home sales in the lower and middle price ranges continue to lag behind the higher-end market. According to a new report from the National Association of Realtors and Realtor.com, the issues of affordability and supply are more pronounced in these segments. The report utilized standard underwriting guidelines for a 30-year fixed mortgage to assess affordability, assuming that 30% of a buyer's income would cover monthly payments, including mortgage, property taxes, and insurance. For households earning between $75,000 and $100,000 annually, which are categorized as middle- to upper-middle-income, the availability of affordable homes has increased slightly. In March 2024, 20.8% of listings were affordable for these buyers, which rose to 21.2% by March of this year. However, this is a stark decline from March 2019, when these buyers could afford nearly half of all active listings. In a balanced market, middle-income buyers should be able to afford 48% of listings. To achieve this balance, the market would require approximately 416,000 more listings priced at or below $255,000. For those earning less than $75,000, the situation is even more challenging. A homebuyer with an income of $50,000 could afford only 8.7% of available listings this March, compared to 27.8% in March 2019. In contrast, higher-income households have a much broader access to the housing market. Buyers earning $250,000 or more can afford at least 80% of home listings, highlighting the disparity between income levels and housing accessibility. Danielle Hale, chief economist at Realtor.com, noted that while there has been an increase in the number of homes available, many are at price points that do not cater to low- and moderate-income households. Progress in inventory has not been uniform across the country, with more homes available in the Midwest and South. Real estate markets are inherently local, and some regions are seeing better balance between supply and demand. Markets like Akron, Ohio; St. Louis; and Pittsburgh are considered balanced. Others, such as Raleigh, North Carolina; Des Moines, Iowa; and Grand Rapids, Michigan, have made improvements but still fall short of meeting demand. However, over 40% of the nation’s largest metropolitan markets are still facing significant challenges. In cities like Seattle and Washington, D.C., even though the supply of affordable homes has increased, buyers need to earn more than $150,000 annually to afford half of the homes available. Some overheated markets are cooling down. Cities like Austin, Texas; San Francisco; and Denver have seen an increase in affordable housing supply, exceeding pre-pandemic levels. This suggests that with the right combination of new construction, market adjustments, and policy efforts, even challenging markets can move towards balance. Conversely, some markets are worsening, particularly in Southern California and New York City. Factors such as years of underbuilding, limited buildable land, high construction costs, restrictive zoning laws, and rapid in-migration contribute to these issues. Homebuilders are attempting to construct more affordable homes, but face obstacles such as rising costs, tariffs, and new immigration policies. In March, single-family housing starts were nearly 10% lower than the same month the previous year. Overall, while there are signs of improvement in some regions, the national housing market continues to grapple with significant supply and affordability challenges, particularly for lower- and middle-income buyers.