Many Metro Areas Too Expensive For Middle-Class Households

The American dream of homeownership is slipping away from middle-class families. A new report from Creditnews Research shows that middle-class households can only afford to buy homes in 52 of the top 100 U.S. metros this year down sharply from 91 metros just five years ago.

For households classified as lower middle class affordable housing is available in only seven of the top 100. The research reveals that unless a household earns over $100,000 annually the possibility of homeownership in 41 of these top metros is simply out of reach.

In cities like San Jose and San Francisco the required income soars beyond $300000 making these areas almost exclusively available to the wealthiest purchasers. “There’s no two ways about it: Housing affordability has worsened significantly since Covid” the study found citing increased mortgage rates and diminished inventory.

Ali Wolf the chief economist at Zonda underscores the changing reality: “In the past if you were middle class it was almost assumed you would become a homeowner. Today the aspiration is still there but it is a lot more difficult.”

Economists and analysts are calling attention to the sharp rise in mortgage rates which following a brief dip are climbing once again nearing the 7% mark as per Freddie Mac’s latest data. Rising mortgage rates and persistent consumer price inflation for essential goods and energy are expected to maintain upward pressure on home prices even as demand withers.

The geographic disparities in housing affordability are stark. The most unaffordable metros remain concentrated on the West Coast — particularly in California and Hawaii — while the most affordable areas are found in the Midwest and parts of Texas.

The conservative approach to this crisis often emphasizes the need for regulatory reform and enhanced market efficiency rather than direct governmental intervention. The ongoing affordability crisis underscores the necessity for thoughtful economic policies that address supply and demand factors in the housing market.

While politically unlikely significant reform of the Fed could go a long way to stabilizing interest rates and prices. A more realistic short-term goal should be removing the oppressive regulatory barriers that are stifling the development of new housing in areas where demand is greatest.