According to a survey of 3,000 Americans by Bright MLS, more than nine in 10 Americans believe housing affordability is a problem, with consumers citing relatively low incomes and high mortgage rates as the primary reasons for concern.
Among the survey’s respondents, the most commonly cited reason for the current housing affordability challenge is that people do not earn enough money to afford buying a home (55.5%). High mortgage rates were the second most common response given at 50.1%.
Americans view a lack of housing supply as a major constraint, although far fewer report that a shortage of new construction is driving unaffordable housing.
Some 43.2% of respondents said that not enough housing is being built at lower price points, and less than a quarter (24.5%) said that there is not enough housing being built where people want to live. Bright said that investors buying up homes was cited as a more important driver of the housing affordability challenge (32.3%), despite investors accounting for a relatively small share of homes bought.
Insufficient Income Most Commonly Cited
It should be noted that the survey was conducted before the Trump administration proposed a ban on the purchase of single-family homes by institutional investors.
Across age groups, insufficient income is the most commonly cited reason for the housing affordability challenge. People under age 40 are slightly more likely to identify a lack of new construction where people want to live, and people aged 60+ are slightly more likely to cite a lack of new construction at lower price points.
Overall, when thinking about why housing is unaffordable, consumers are focused more on incomes being too low and mortgage rates being too high rather than a lack of supply, Bright MLS said.
According to Bright, there is an apparent disconnect between what everyday Americans think is the reason housing is unaffordable and what many experts claim. In the short term, however, the perspectives of Bright MLS’s survey respondents may be on target.
Between 2010 and 2020, household income and home price growth generally tracked.
That meant incomes were typically growing about as fast as home prices. However, in 2020, there was a sharp divergence where home prices, as measured by the S&P Cotality Case-Shiller Home Price Index, began to increase faster than the median household income.
Mortgage Rates Began Rising in 2020
Mortgage rates, which were falling from their 2010 levels, began to rise quickly in 2020 before beginning to flatten, Bright said.
By contrast, over the past 15 years, residential construction as measured by building permit activity actually seems relatively strong, with permits for new housing construction much higher than in 2010, Bright said
It said that consumers thinking about the recent past understandably point to a lack of income growth and an uptick in mortgage rates when they think about why housing has become unaffordable, Bright said.
The longer-term picture is a little different, Bright noted.
Going back to 1987, it is clear that mortgage rates are lower now than they were in the 1980s, but Bright said there have been big upticks in home price appreciation that corresponded to expansion of mortgage access (via sub-prime mortgage offerings in the early part of the 2000s) and sharp drops in rates that were driven by Federal Reserve policy in 2020-2021.
Income growth, Bright said, generally has been slower than home price appreciation since the early 2000s, although without the subprime and pandemic-era booms, those measures would have tracked more closely.
Concerning supply, the longer view shows that the amount of new housing construction has lagged significantly compared to the late 1980s and 1990s, even though there was an uptick in more recent years, Bright MLS said.
The post Bright MLS Survey Shows Incomes, Mortgage Rates are Top Homeownership Barriers first appeared on The MortgagePoint.
