High prices and mortgage rates have plagued the housing market. Now, a welcome shift

• More affordable homes are coming onto the market.
• In May, there were 35.2% more homes for sale than a year earlier.
• Every region in the U.S. saw gains in May.

Mortgage rates are high, home prices are lofty and selection is slim.

There isn’t much to like about the housing market, except for one small positive: more affordable homes are coming onto the market, according to real estate marketplace Realtor.com.  

In May, the national median listing price inched up 0.3% to $442,500 from a year earlier, but price per square foot rose 3.8%, Realtor.com said. Since May 2019, the median listing price has jumped 37.5% while price per square foot soared 52.7%.

With huge price gains since 2019, homes don’t feel like a bargain. But Realtor.com says the big difference between the percentage changes in listing price and price per square foot indicates more affordable homes are for sale now.

“The share of inventory of smaller and more affordable homes has grown, which helps hold down the median price even as per-square-foot prices grow further,” said Realtor.com’s chief economist Danielle Hale. “Some much-welcomed news for prospective buyers.”

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What’s an “affordable” home?

In May, there were 35.2% more homes for sale than a year earlier, Realtor.com said, the seventh consecutive month inventory rose, which is good news for buyers in itself, it said.  

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But “a deeper dive into the mix of homes for sale shows a 46.6% increase in homes priced in the $200,000 to $350,000 range across the country year-over-year, even surpassing last month's high of 41.0%, indicating affordable homes continue to enter the market,” it said.

Inventory growth in this price range outpaced all other price categories in every month from February through May, it said.

Where are there the largest jumps in homes for sale?

Every region in the U.S. saw gains in May. Compared with last year, listings grew by 47.2% in the South, 34.5% in the West, 20.5% in the Midwest, and 9.4% in the Northeast, Realtor.com said.

All 50 of the largest metro areas saw active listings rise in May from a year earlier. The metro areas with the most growth in inventory were Tampa (87.4%), Phoenix (80.3%), and Orlando (78.0%), Realtor.com said.

However, only 12 metros saw inventory exceed pre-pandemic levels. They were predominantly in the South and West, including Austin (+33.6%), San Antonio (+31.8%), and Denver (+22.0%), it said.

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Still need more income to buy a house

Even with improved inventory, you still need more money to buy a house because prices are much higher than pre-pandemic levels, Realtor.com said.

“For buyers, the increase (in price) could mean being priced out for certain homes if their household income did not experience similar or greater growth, especially when taking higher mortgage rates into account,” Realtor.com said.

In May, the typical monthly mortgage payment of the median home grew by roughly $158 compared with a year earlier, it said. This increased the required household income to purchase the median-priced home by $6,400, to $119,700, after also accounting for taxes and insurance.

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.