High prices and low supply make buying a home harder, especially for Black households

The twin challenges of high home prices and low housing supply are restricting the share of homes that buyers can afford, and Black and Hispanic buyers’ incomes further limit their choices, according to a report the National Association of Realtors released Monday.

The number of available homes that are affordable to buyers depends on their income. Because Black and Hispanic households have lower incomes as a whole than white households, they can afford fewer of the limited number of houses on the market. It’s one reason for persistent racial ownership gaps.

“We knew that already, but now we have more evidence,” said Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors.

» READ MORE: Gaps in Black and white home ownership transcend a booming market and threaten to leave some behind

Nationally, Black households have the lowest home ownership rate of any race at 43%, according to figures the Census Bureau released last week. White households have the highest, at 74%.

Homes are getting further out of reach for aspiring buyers as prices far outpace wage growth. Households at most income levels could afford to buy fewer homes in December than they could before the pandemic, the result of both rising prices and inadequate supply, according to the National Association of Realtors.

Area median income for the Philadelphia region is $75,600 for a household of two and $94,500 for a household of four. The metropolitan area had one affordable home listing for every 64 households with income between $75,000 and $100,000 in December. Buyers here are better off than in the Boston region, for example, which had one listing for every 416 of these households.

Buyers in the Philadelphia region had less competition in December 2019, when the region had one affordable listing for every 33 of these households.

Shares of area households within each income bracket vary widely by race. Consider the percentages of each race with income below $75,000:

Nationally, households with income of $100,000 or more could afford to buy at least half the homes that were listed for sale in December. But although 35% of white households have that income, 24% of Hispanic households and 20% of Black households do.

» READ MORE: Low incomes make Philadelphia homes less affordable, Pew study finds

In the Philadelphia metro area, households with income of $100,000 or more could afford to buy at least 60% of listings. About 45% of white households in the region have that income, and 21% of Hispanic households and 20% of Black households do. So gaps in affordability are larger in the region than nationwide.

The Baltimore region and the Warren, Pa., metro area — which includes a piece of northwestern Pennsylvania and western Ohio — are among the most affordable regions nationally for Black and Hispanic households to purchase a home. The Pittsburgh metro area also is one of the top affordable markets for Hispanic households.

In Evangelou’s analysis, affordability means a household spends 30% of its income on housing costs, including mortgage, insurance, and taxes. Households that spend more than that are considered to be cost burdened, according to federal guidelines.

Evangelou said the National Association of Realtors hopes to use her findings to help increase home ownership among people of color, and she hopes policymakers also take note.

» READ MORE: It’s no easier for Black Philadelphians to become homeowners now than it was 30 years ago

“Our focus is to try and help to identify issues with affordability for minority groups, then to see what we can do to help them,” she said. “The ultimate goal is to have a higher home ownership rate for minority groups. Because home ownership is for everybody.”

Habitat for Humanity Philadelphia is one of the organizations that helps make home ownership possible for Philadelphians who wouldn’t normally qualify for a traditional mortgage or be able to afford a home. The nonprofit subsidizes housing costs for its clients, including school cafeteria workers, teacher’s aides, and home health aides, whose wages are too low to buy without help.

Corinne O’Connell, the nonprofit’s chief executive officer, said aspiring buyers need down payment assistance and other financial help, and developers need subsidies to build more income-restricted housing. The city, nonprofits, and traditional developers have to work together, she said.

Philadelphia’s main issue is not housing supply, she said, but the affordability both of buying homes to move into and repairing homes to stay in. Increasing affordability in the city and nationwide, she said, “is going to require a reimagining, shifting from housing as a commodity to it being a human right.”

Nationwide, a median-priced home cost $358,000 in December 2021; that’s about $80,000 more than in December 2019, according to the National Association of Realtors.

» READ MORE: Record low housing supply across the Philly area will continue to challenge buyers

Nationally, the number of available and affordable homes for households with income between $50,000 and $75,000 dropped the most — by 63% — compared with other income groups. That income bracket has the highest share of Philadelphia area residents at 15%.

Pennsylvania’s minimum wage is $7.25 an hour for most jobs. A person with that wage who works 40 hours a week every week would have a gross income of about $15,000. Households in the Philadelphia area that earn this much could afford to buy only 1% of the homes for sale in December.

New Jersey’s minimum wage is $13. A person with that wage who works 40 hours a week would have a gross income of about $27,000. Households in the Philadelphia area with those earnings could afford to buy roughly 10% of the homes for sale in December.

Workers earning even twice New Jersey’s minimum wage could afford only 40% of homes for sale in the Philadelphia area in December.

The report’s findings highlight the need for more housing that aspiring homeowners can afford, said Christopher Beadling, president of the Pennsylvania Association of Realtors and vice president and broker of record for Quinn & Wilson Inc. Realtors in Montgomery County.

But for now, Beadling said, Realtors are trying to manage clients’ expectations about the pool of available homes they’ll be able to afford and prepare them for ongoing stiff competition. Beadling helped a young couple close on their first home a couple weeks ago. But they first submitted offers on nearly 10 houses.