The U.S. housing market continues to grapple with affordability issues, even as inventory levels begin to recover from pandemic-era lows. A recent report highlights the uneven distribution of housing supply across different income brackets, revealing that the lower end of the market remains severely undersupplied.

According to the S&P CoreLogic Case-Shiller Index, home prices in March were 39% higher nationwide compared to March 2019, before the pandemic triggered a surge in demand and prices. While the overall supply crunch is easing,the availability of homes at affordable price points remains a critical concern.

Affordability Gap Widens for Lower-Income Buyers

The study, conducted by the National Association of realtors and Realtor.com, assessed affordability based on standard underwriting guidelines for a 30-year fixed mortgage, assuming 30% of income is allocated to monthly payments covering mortgage, property tax, and insurance.

The findings indicate that middle- to upper-middle-income buyers, earning between $75,000 and $100,000 annually, have seen a slight enhancement in the supply of homes they can afford. In March of this year, 21.2% of listings were within reach for this group, up from 20.8% in March 2024. Though, this is still far below the 48.8% of listings affordable to them in March 2019.

“Shoppers see more homes for sale today than one year ago, and encouragingly, many of these homes have been added at moderate-income price points,”

The situation is even more challenging for those earning below $75,000 annually. A homebuyer with a $50,000 salary could afford only 8.7% of available listings in March, compared to 9.4% in March 2024 and a significantly higher 27.8% in March 2019.

In contrast, higher-income households earning $250,000 or more have access to a vast majority of the housing market, with at least 80% of home listings within their reach.

Regional Disparities in Housing Affordability

While the report provides a national overview, the real estate market varies significantly from one location to another. “It tells us that with the right mix of new construction, market shifts, and local policy efforts, even some of the moast challenging markets can start to bend toward balance,” according to the report’s authors.

Markets in the Midwest, such as Akron, Ohio; St. Louis; and Pittsburgh, are considered balanced, with supply meeting demand. Other cities, including Raleigh, North Carolina; Des Moines, iowa; and Grand Rapids, Michigan, have made progress in adding more affordable listings but still fall short of meeting demand.

However, over 40% of the nation’s 100 largest metropolitan markets continue to struggle with affordability. Seattle and Washington, D.C., are among these, where households need to earn over $150,000 annually to afford even half of the available homes.

Some previously overheated markets, like Austin, Texas; San Francisco; and Denver, have experienced a ample increase in the supply of affordable homes, now surpassing pre-pandemic levels.

Conversely, markets in Southern California, including Los Angeles and San Diego, along with New York City, are facing worsening affordability conditions due to factors such as underbuilding, limited land, high construction costs, restrictive zoning laws, and rapid in-migration.

Homebuilders are attempting to increase the supply of affordable homes, but rising costs, possibly exacerbated by tariffs and new immigration policies, pose a challenge. Single-family housing starts in March were nearly 10% lower than the same month a year prior.