How tough is it to afford a home in this wild housing market? A lot depends on how much you earn and how many houses are for sale where you live.

Record high prices and record low inventory are creating an affordability crisis for homebuyers, according to a new report from the National Association of Realtors.

“With limited supply, the issue of affordability looms even bigger,” said Nadia Evangelou, NAR’s senior economist, director of forecasting and lead author of the report. “Wages may have increased, but not anywhere near the pace of the home prices.”

Nationally, home prices have gone up about 30% since the end of 2019, so that a typical home costs about $80,000 more than pre-pandemic, according to NAR. During the same time, inventory fell to a record low of about 1 million properties available for sale at the end of December last year.

NAR released a report Monday that looked at how this combination of record high home prices and record low inventory has impacted people’s ability to afford a home. Rising prices are already limiting the pool of homes within reach for buyers, the research found, but buyers’ options are even fewer since there are significantly less homes available for sale. This has made it increasingly difficult for buyers, particularly Black Americans, to achieve homeownership.

Evangelou said the researchers looked at data from Realtor.com that included an inventory of about 500,000 listings to examine the impact of high prices and low inventory on affordability by income bracket, location and race.

Who is getting squeezed out of the market?

Among the homebuyers hit hardest by high prices and low inventory are those earning $50,000 to $75,000, said Evangelou. The report found that these buyers have a maximum affordable home price of $325,110, and the share of listings that they can afford has dropped by 6% since before the pandemic. The researchers also found there are 63% fewer listings that these prospective buyers can afford than there were in 2019.

Also hurt are homebuyers earning between $75,000 and $100,000. This group, the report found, can afford a maximum home price of $433,480. Researchers determined these prices by making some assumptions, including that the buyer is not spending more than 30% of their income on housing and that the purchase is financed with a 30-year fixed-rate mortgage.

Given that price threshold, homebuyers in this income bracket can afford to buy 51% of homes for sale nationally – or 245,300 of the nearly half a million homes for sale that the report took into account. The same buyers would have been able to afford 58% of the homes for sale in 2019. During the pandemic, affordability for households in this income group dropped by 7%.

As more people in the price range compete for that smaller pool of homes, the prices go up. This makes for fiercer competition for a home. For the $75,000 to $100,000 income group nationally, there is only one listing available for every 65 households. It is a dramatic change in availability from one listing for every 24 households in 2019, according to the report.

“We have seen that affordability has dropped compared to what we saw pre-pandemic,” said Evangelou. “That explains why the housing market is so competitive now.”

Location is key

Where you are buying a home also matters a great deal.

For homebuyers earning $50,000 to $75,000, there are 125 households for every one affordable listing, nationally. But in some cities with greater inventory, the pool of potential competitors drops and affordability improves.

Des Moines, Iowa, has the most homes for sale for this income bracket with one affordable listing for every 78 households. It is followed by Detroit; Augusta, Georgia; Youngstown, Ohio and Scranton, Pennsylvania.

On the other end of the spectrum are places where affordability is the worst for buyers. For homebuyers earning $75,000 to $100,000, the city with the fewest homes to buy is San Jose where there is one affordable home for every 3,528 households, the report found. It is followed by Thousand Oaks and Ventura, California; San Diego; Los Angeles; Seattle; San Francisco; Salt Lake City and Austin.

There are some cities where affordability has improved through the pandemic – like San Francisco, San Jose and Washington, DC. In these places, higher incomes together with lower mortgage rates and prices rising more slowly than other cities helped make homes more affordable. But even though some buyers can afford a greater share of homes, fewer options exist as a result of the record-low inventory.

For example, households earning between $100,000 and $125,000 in San Francisco can afford to buy 180 fewer homes now compared to December 2019. And for households there earning between $125,000 and $150,000, there are about 300 fewer affordable homes available than prior to the pandemic.

“In general, an increase in salary makes housing more affordable to a buyer,” said Danielle Hale, Realtor.com’s chief economist. “But due to the reductions in inventory over the last few years, today’s buyers in large tech markets can actually afford a smaller number of homes than they could two years ago, despite an uptick in wages.”

Affordability by race

The report also found that a persistent racial homeownership gap exists in America. Since 2017, the homeownership rate for White Americans has remained comfortably above 70%, while the rate is just over 40% for Black Americans.

“The low inventory challenge is particularly acute for some racial and ethnic groups who have faced greater hurdles to homeownership stemming from, among other things, lower incomes as a group,” said Hale.

To look at affordability by race, researchers created a scale that accounts for the smaller share of Black, Hispanic and Asian households in the higher income brackets compared with White households.

Approximately half of all homes currently listed for sale are affordable to households with at least $100,000 income and there are big differences in affordability by city. But nationwide, 35% of White households have incomes greater than $100,000, while only 20% of Black households do.

The affordability gap is even larger in some cities like Charleston, South Carolina, or Bridgeport, Connecticut, where White households are more than twice as likely to buy a home as Black households.

“At the same time, there are affordable markets that still provide opportunities to achieve homeownership as inventory at affordable price points is reasonably available,” said NAR Chief Economist Lawrence Yun.

Akron, Ohio, is the most affordable city for Black homebuyers, based on the analysis. Households earning less than $75,000, which accounts for 77% of Black households there, can afford to buy nearly 72% of the listings. Other cities where affordability is strong for Black homebuyers are: Youngstown Ohio; McAllen, Texas; Baltimore and Memphis, Tennessee.

The most affordable city for Hispanic home buyers is Toledo, Ohio, followed by Youngstown, Akron and Baltimore, the report found.

“The housing wealth gain has been sizable over the past two years,” said Yun. “However, due to the ongoing inventory shortage and rising interest rates, homeownership attainment will become especially challenging unless drastically more housing supply is available.”