A look at housing affordability in the U.S.

There is a lot of discussion these days around the current U.S. housing markets and how they are affecting corporate relocation. Employee reluctance to relocate today is higher than in years past, and one of the biggest ongoing issues coming out of the pandemic has been the combination of high home prices, low availability of housing, and elevated mortgage rates. Additionally, costs like property taxes, utility bills, and maintenance costs have also continued to rise. All of that has added up to some big challenges with housing affordability for both homeowners and renters.

The 2024 Moving Forward Report from NIBS summarizes the situation:

The U.S. Department of Housing and Urban Development’s standard measure of affordability for renters and homeowners is to spend 30% or less of their gross income on housing costs. In recent years, the combination of a housing shortage, inflation, and higher interest rates increased the cost of both rental and purchase housing faster than wage growth, leading to higher percentages of consumers paying more than 30% and even 50% or more of their income for housing. 

Two stats stood out:

1. Median home prices in 99% of counties throughout the U.S. were less affordable than historical averages
2. From early 2020 to early 2023, rents in professionally managed buildings increased by 24%.

Their report explains that there are many issues compounding the problem and they share that there is probably not one solution but rather many that are needed to remedy this situation. Finance & Commerce detail out how this issue has been a long time in the making in their article, “The United States is slogging through a housing affordability crisis that was decades in the making.”

In the meantime, with increased work flexibility, we see more people requesting, and getting approvals, to work from less expensive locations. One of the three trends shared by John Burns Research is that affordable areas near major, higher-priced metros are migration hot spots. High-growth markets have become increasingly expensive to buy and rent homes, forcing many potential home buyers to relocate to a nearby, smaller market with more affordable homes.

So where is housing affordability most challenging and where is it more affordable for housing? As part of the 2024 Best States rankings, U.S. News assessed which states are the best for housing affordability, based on Bureau of Economic Analysis data in which an index score of 100 means a state's housing affordability matches the overall national level. This article in U.S. News takes a look at a wide variety of markets sharing where many are handcuffed into staying where they are at and others where the degree of affordability is more reasonable.

These are the 10 best states for housing affordability, according to the data used in the Best States analysis:

1. West Virginia
2. Arkansas
3. Mississippi
4. Alabama
5. Kentucky
6. Oklahoma
7. South Dakota
8. North Dakota
9. Louisiana
10. Iowa

Curious to know what the worst states are? Here are the 5 least affordable states:

1. California
2. New Jersey
3. Hawaii
4. Colorado
5. Massachusetts

These issues aren't expected to be resolved any time soon. Home prices, mortgage rates, inventory levels, and commission structures will remain challenging for housing affordability for the rest of 2024 and into 2025, according to this information shared by Bankrate.