Leaders from the National Association of REALTORS® made the case to members of Congress and their staff on Tuesday that housing affordability is rapidly deteriorating and action is needed to keep homes financially accessible to buyers. In an exclusive virtual briefing, NAR President Leslie Rouda Smith told congressional leaders that for too many Americans the cost of buying a home remains a barrier to property ownership—a primary pathway to generational wealth-building.
“Enabling more households to achieve and maintain homeownership is crucial to narrowing racial wealth gaps,” Rouda Smith said. “But with rising mortgage rates and a persistent shortage of affordable homes, homeownership opportunities are limited for many middle-class, first-time and first-generation home buyers.”
Three Forces Driving the Housing Market
Jessica Lautz, NAR’s vice president of demographics and behavioral insights, said at the briefing that inflation, rising mortgage rates and inventory are driving changes in the housing market. “For a $300,000 mortgage—one that the typical first-time home buyer would probably feel pretty comfortable entering into—we know that their monthly payment has jumped to $1,800 from $1,300 just at the beginning of the year. That is quite a jump,” Lautz said. “It means there are a lot of people who are going to say, ‘I cannot afford to enter the housing market.’”
NAR data, which lawmakers in Washington rely on as they craft policy and propose new housing legislation, shows that inventory remains stubbornly low. “Even with this rise in mortgage rates, even with fewer buyers coming into the market, we still have seen nearly a 15% year-over-year home price increase. We are seeing this in nearly every major city across the country,” Lautz said. “We are seeing this in places where we haven’t seen it before. We are talking about 123 straight months of year-over-year home price gains.”
Lautz said she expects that as the market cools, home sales will return to pre-pandemic levels. But lingering supply issues mean home prices will remain elevated.
NAR’s landmark 2021 report, “Housing Is Critical Infrastructure,” showed an underbuilding gap of 5.5 million units—a gap so large it would take more than a decade to correct. NAR advocates an all-of-the-above approach to closing the supply gap, including zoning reform, money for new construction, increased labor, and tax incentives to convert unused commercial space to residential.
Racial Homeownership Divide Worsens During Pandemic
The briefing also gave Capitol Hill policymakers a snapshot of how the racial homeownership divide grew deeper during the pandemic. Lautz presented NAR data showing that the homeownership rate for White Americans today is more than 72% while it’s just 43% for Black Americans. “That gap is as wide today as when the Fair Housing Act began back in 1968,” Lautz said.
Student loan debt is especially burdensome to Black home buyers, according to NAR's analysis. “Forty-one percent of [recent] Black home buyers had student loan debt; that is higher than any other race,” Lautz said. “And if you are a first-time home buyer, you don’t have equity from that previous home.” NAR data shows that 38% of recent White home buyers were able use past home equity to help finance a down payment. In comparison, only 21% of Blacks, 25% of Hispanics, and 16% of Asians could do so.
Millennials Now Command the Housing Market
Millennials, now the biggest generation in America, are “impacting everything we do,” Lautz told lawmakers. “And it is one of the reasons why we are missing 5.5 million units in the U.S.”
About 32 million young adults are nearing their peak homebuying age. They're spending less on transportation than past generations did at their age, but they're spending more on housing and education. “Sixty percent of millennials who are not homeowners today are saying that student loan debt is one of the biggest hurdles delaying them from purchasing a home,” Lautz said.
The other significant shift in the data is a drop in U.S. birth rates. The segment of home buyers with a child under the age of 18 has dropped from a share of 58% in 1985 to just 31% today. “We are absolutely seeing that reflection in the data on home buyers,” Lautz said. “It is going to shift a few factors: You need a smaller home if you don’t have a growing family, and the other big factor is where that home is.” Households without kids may cast a wider net in their home search, seeking more affordable options, rather than limiting their search based on school districts.