These Home Buyers Are Having the Hardest Time Finding a House

There's a reason 2023 has been such a tough year to buy a home. Not only are mortgage rates relatively high, but home prices in many areas remain elevated as well. Throw in a glaring lack of inventory, and it's easy to see why so many buyers are being forced to sit this year's market out.

But while a lack of inventory is certainly a problem in the broad real estate market, middle-income buyers are especially low on options at this point in time, says the National Association of Realtors (NAR). And that could continue to be a problem for a long time.

Middle-income buyers don't have many choices

Today's housing market is short about 320,000 listings in the $256,000 and under price range. That's considered an affordable range for households earning up to $75,000 a year. 

To put it another way, based on today's inventory levels, middle-income buyers can only afford to purchase 23% of available listings nationwide. And until property listings start to pick up, middle-income buyers may get stuck waiting on the sidelines.

Why housing inventory is so low

In 2020 and 2021, it was possible to chalk low inventory up to pandemic-related uncertainty. It's doubtful that's a big driver of low inventory today, though economic uncertainty may be prompting some would-be sellers to sit tight for the time being. 

Rather, a big reason real estate inventory is so low boils down to the fact that it's gotten expensive to sign a mortgage loan. In 2020 and 2021, many people rushed to refinance their mortgages when borrowing rates started to plummet. It's doubtful that many of those people would want to sell their homes today, as doing so would inevitably mean signing a new mortgage at a much higher rate.

Even homeowners who didn't refinance during the 2020-2021 boom may be sitting on mortgages with rates that are significantly lower than the rates being offered to buyers today. And so until mortgage rates start to slide, we may not see housing inventory pick up all that much. Unfortunately, that could leave a lot of buyers out in the cold -- especially middle-income buyers who may not have the most flexibility. 

Of course, in time, rates should come down and real estate listings should pick up. But it's pretty fair, at this point, to say that we're not going to see a whole lot of inventory hit the U.S. real estate market in 2023. And that means many people may have to put off their plans to buy a home until 2024 or even beyond.

The good news is that delaying a home purchase gives prospective buyers more time to save for down payments. And the more money that's put down at closing, the less expensive a mortgage ends up being. But still, many people don't want to wait to buy a home, so today's lack of inventory is apt to be a major source of frustration for buyers who can only stretch their budgets so far.