June is National Homeownership Month, when Realtors promote the benefits of homeownership.

"When more people own homes, everyone benefits," said Jim Hamilton, president of the Silicon Valley Association of Realtors.

"Homeowners get involved in community activities such as volunteering and participating in community events. This gives them a sense of belonging more than someone who is renting," Hamilton said.

Homeownership, he said, is a financial investment that brings value to families and communities across the country: Owning a home is a pathway to economic well-being and intergenerational wealth-building. Along with home equity gains and overall appreciation, the mortgage interest rate and property tax deductions are tax advantages.

While owning a home is the centerpiece of the American Dream, it's not always something easy to attain, the scarcity of available homes for sale continues to keep home prices at an unaffordable level, especially for middle-income families.

According to a recent Housing Affordability & Supply report from the National Association of Realtors and Realtor.com, the U.S. housing market is short more than 300,000 affordable homes for middle-income buyers. The joint report examines the number of listings lacking by price range in the current market when compared to a balanced market, which is defined as when half of all available homes fall within the price range affordable for middle-income buyers.

Housing shortage worse for middle class

"Middle-income buyers face the largest shortage of homes among all income groups, making it even harder for them to build wealth through homeownership," Nadia Evangelou, senior economist and director of real estate research for the National Association of Realtors, said. "A two-fold approach is needed to help with both low affordability and limited housing supply. It's not just about increasing supply. We must boost the number of homes to the price range that most people can afford to buy."

At the end of this past April, approximately 1.1 million homes were available for sale across the nation, an increase of 5 percentage points from one year ago. The market, however, is lacking about 320,000 homes priced $256,000 and under, which is the affordable price range for middle-income buyers or households earning up to $75,000 annually based on national median income levels. This means middle-income households can afford to buy less than a quarter (23%) of listings in the current market. Five years ago, this income group could afford to buy half of all available homes.

"Ongoing high housing costs and the scarcity of available homes continues to present budget challenges for many prospective buyers, and it's likely keeping some buyers in the rental market or on the sidelines and delaying their purchase until conditions improve," Danielle Hale, chief economist at Realtor.com, said.

Bay Area not as bad as other metros

Surprisingly, the San Francisco Bay Area, known for its high-priced housing market, is not among the 100 largest metro areas with the fewest affordable homes for middle-income buyers. According to the report, the metro areas of El Paso, Texas; Boise, Idaho; and Spokane, Washington, have the fewest affordable homes available for middle-income buyers.

"Even with the current level of listings, the housing affordability and shortage issues wouldn't be so severe if there were enough homes for all price ranges. Our country needs to add at least two affordable homes for middle-income buyers for every home listed for upper-income buyers," Evangelou said.

The data reveals that in expensive metropolitan areas with home prices above $850,000, such as the Bay Area, most buyers with upper-middle incomes would be able to afford to purchase a home if there was not an inventory shortage. However, even if the median income in most of these areas is above $150,000, due to the high cost of living, residents need to earn a higher income compared to other more affordable areas to be able to buy a house.

In San Jose, where the median household income is higher than $150,000, there is a shortage of about 1,340 listings with a price lower than $850,000. Buyers earning $200,000 should be able to afford to buy more than 60% of the listings, but they currently can afford less than 20% of the homes available for sale.

According to MLSListings, the median price for a single-family home in Santa Clara County reached $1.7 million in May 2023. In San Jose, the median sales price was $1.5 million. In Palo Alto, the May median sales price was $3.1 million.

Based on the report, homebuyers in San Mateo and Santa Clara counties need a minimum qualifying income of more than $400,000 to purchase a median-priced home, Hamilton said.

In San Mateo County, 19% of homebuyers could afford to purchase a median-priced home in the first quarter of 2023, according to the California Association of Realtors. Homebuyers needed a minimum annual income of $458,400 to qualify for the purchase of the county's median-price home of $1.85 million. Their monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be a whopping $11,460.

In Santa Clara County, 21% of homebuyers could purchase a median-priced home in the first quarter of 2023. Homebuyers needed a minimum annual income of $401,200 to purchase the median-priced home of $1.6 million. Their monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $10,030.

"It's tough for middle-income homebuyers," Hamilton said.

Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.