Housing Market Half As Affordable Than Just Three Years Ago
Americans’ purchasing power in the real estate market has been cut in half in less than three years as home prices and mortgage rates rise, pricing average Americans out of the market, according to NBC News.
Housing affordability has been cut in half in less than three years since August 2023, when a median-income household could afford a 30-year mortgage on a $356,273 house, compared to December 2020, when that same family could afford a 30-year mortgage for a $737,392 house, according to data analyzed by NBC News. The loss of purchasing power is due to rising home prices and record-high mortgage rates, both hitting American consumers and driving up prices. (RELATED: US Mortgage Rates Just Hit A Shocking New High)
Mortgage rates have taken a sharp jump over the last three years, with the average 30-year fixed rate mortgage going for 2.68% in December 2020, as opposed to the current rate, which has reached 7.63%, according to NBC News. Average home prices have taken a similar jump in that time frame, going from $360,000 in the fourth quarter of 2020 to $416,000 in the second quarter of this year.
Median household income has declined from $76,358 in December 2020 to $75,322 as of August 2023, according to NBC News. The amount of income needed to afford a median-priced home has increased dramatically to $94,487 in August 2023, compared to just $38,280 in December 2020, pricing many Americans out of the housing market as a whole.
Inflation has seen a huge spike since the COVID-19 pandemic, which has raised prices across the board, peaking at 9.1% year-over-year in June 2022, and has remained elevated, most recently being reported as 3.7% for September, far from the Federal Reserve’s 2% target. The Fed has tried to bring down inflation by raising its federal funds rate to a range of 5.25% and 5.50%, which has in turn placed upward pressure on mortgage rates.
Following the loss in purchasing power, the U.S. real estate market will see the fewest number of homes sold since 2008, when the country was in the middle of the subprime mortgage crisis and the Great Recession.
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This article was published by The Daily Caller News Foundation and is reproduced with permission.
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