As Robert Palmer nearly sang, US housing is simply unaffordable.
If we look at the Case-Shiller National home price index against real weekly wage growth, you can see the problem clearly. Since Covid and The Fed’s overreaction by providing staggering monetary stimulus, home prices shot up while real median weekly earnings collapsed.
Buying a house requires a much bigger slice of people’s income now — making this the most unaffordable housing market since 1984, by one measure.
And that crushing lack of affordability isn’t expected to improve much in the near future.
In just the last few weeks, US home prices rose for the first time in months and the 30-year fixed mortgage rate hit a 22-year high of 7.23%.
That has made what was already a dismal affordability picture even worse.
At today’s rates, buying a median-priced home would require a monthly principal and interest payment of $2,440 for those making a 20% down payment, according to Black Knight, a mortgage technology and data provider.
The rising cost of shelter represented 90% of last month’s inflation.
That’s $1,172 a month more in mortgage payments from just two years ago, before the Federal Reserve raised its benchmark lending rate 11 times in 18 months, Black Knight found. It’s a 92% increase — and is taking a growing chunk out of household budgets already facing inflation on many fronts.
Currently, 38.6% of the median household income is required to make the monthly payment on the average home purchase, making housing the least affordable it’s been since 1984, according to Black Knight.
“To put today’s affordability levels in perspective, it would take some combination of up to a 28% decline in home prices, a more than 4% reduction in 30-year mortgage rates, or up to a 60% growth in median household incomes to bring home affordability back to its 25-year average,” said Andy Walden, vice president of enterprise research and strategy at Black Knight.
Must as well face it, we’re addicted to gov. Or at least Fed monetary stimulus.
Just look at Personal Interest payments under Bidenomics.
The themesong for Bidenomics should be “Let’s Go Crazy” with spending … on green donors!
Biden and Powell probably sing “Hurt so good!”
