Americans Face Historic Lack Of Affordability In Housing Market, Data Shows

The dream of homeownership in the U.S. is becoming increasingly challenging. Factors such as escalating interest rates, surging property prices and mounting insurance expenses have made housing less accessible across all states.

What Happened: Recent data from the National Association of Realtors highlights a concerning trend: The average American family's ability to own a home is at its lowest in a decade.

Furthermore, a recent study by Moody's reveals that in 2023, a median-income family in nearly 12 states would struggle to afford a new mortgage on a median-priced home.

This is a significant increase from 2019 when only two states faced such challenges, according to Insider. 

Moody's housing affordability index, where a score of 100 indicates that a median-income family can just afford a new mortgage for a median-priced home, has shown a decline for every U.S. state in the past four years.

According to Moody's strategists, this trend could lead to negative outcomes such as reduced population growth, increased migration, decreased consumer spending, heightened inequality and a rise in homelessness.

These factors can potentially reduce state revenue growth and increase expenditure. States like Oregon, Washington, Colorado, Florida, Massachusetts, New York, Hawaii and California are particularly affected.

Also Read: Downsizing Homeowners Hit The Jackpot Amid Skyrocketing Property Values

Over the past decade, Florida, Idaho and Nevada have also reportedly experienced the most significant drops in affordability, primarily due to an influx of new residents and increased housing demand.

The rental sector isn't immune either. From 2019 to 2023, the number of states where the rent-to-income ratio exceeds 20% has reportedly risen from five to nine. On average, Americans now pay $2,047 per month for rent, a 3.2% increase from the previous year, according to Insider. 

Additionally, challenges such as extreme weather events, construction inflation and increased litigation have pushed insurance premiums higher. For instance, in Florida, the average annual home insurance premium has tripled between 2018 and 2023, the outlet noted. 

For investors keen on gaining exposure to the real estate sector without direct property ownership, ETFs offer a viable option. Two notable ETFs in this space are the iShares U.S. Real Estate ETF IYR and the Vanguard Real Estate ETF VNQ. Additionally, investors can consider stocks like Zillow Group, Inc. Z and Redfin Corporation RDFN that are closely tied to housing market trends.

In comparison, Anywhere Real Estate Inc. HOUS and RE/MAX Holdings, Inc. RMAX have leveraged their vast networks and established brand names to maintain a significant market share. 

Now Read: Here's Why Housing Prices Could Fall By 20% In 183 Cities Across US, Including Boise, Charlotte And Austin

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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