The US housing affordability crisis continues to worsen as mortgage rates skyrocket to two-decade highs while the cost of an average home is still at bubbly levels. Financing costs are through the roof, and anyone earning less than $100,000 has been priced out of homeownership.
A new report via real estate brokerage firm Redfin Corp. found that in October, the average buyer needed to earn $107,281 to afford the monthly mortgage payment of a median-priced home, up a whopping 46% from a year ago of $73,668.
Considering there have been a record 19 consecutive months of negative real wage growth, most of which have been under President Biden’s tenure, many prospective homebuyers have likely given up and are now renting (or back in their parent’s basement).
“Affordability challenges are a major reason why home sales have slowed so dramatically over the last few months,” Redfin said in the report.
What’s made the affordability crisis worse is the Federal Reserve’s most aggressive interest rate hiking in decades to quell inflation has sent the 30-year fixed mortgage above 7% within the last several quarters.
This has caused a ‘payment shock’ as elevated rates, high home prices, and faltering wage growth have priced out millions of Americans.
According to the National Association of Realtors, today’s souring homebuying environment has been described as the ‘worst in decades’.
None of this should surprise readers since we first stated in March that soaring interest rates would significantly challenge housing affordability.
Today, we see the “Death Of The American Dream And Home Ownership.” And what’s the result: you’ll rent and own nothing… Well, that’s a very similar statement from the World Economic Forum: by 2030, “you’ll own nothing, and you’ll (still) be happy.
More importantly, all of this suggests home prices could be on the cusp of a major downturn.
We suspect 2023 will be a tumultuous year for the housing market until the Fed pivots.
… And we almost forgot that a Bloomberg OP-ED earlier this year said anyone earning less than $300k should eat lentils.
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