"Middle Class Families Can't Afford Homes
Anymore As Mortgage Rates Hit Record Levels"
By Epic Economist
"90% of Americans say that owning a home is a key part of the American dream. But today, more than half of them believe they will never own their dream home, and about 70% of U.S. households can’t afford the average-priced home, especially when considering that mortgage rates have more than doubled since 2020. What’s even more alarming is that homeownership rates amongst middle-class families are rapidly shrinking. Month after month, more and more middle-income Americans are being priced out of the market entirely, and that is having a huge impact on their ability to build equity, save money, and actually have a middle-class lifestyle. Never before in history, middle-class families have been so close to financial insecurity and poverty. And the ongoing housing crisis has everything to do with it.
In the past decade, mortgage payments on homes sold at the median price in the United States have tripled. Over the past three years alone, mortgage rates shoot up by 131%, going from 3.15% in May 2020 to 7.29% in May 2023. It is safe to say that the growth of median salaries hasn’t approached that pace. There is a nationwide shortage of homes for sale right now, and those listed on the market are reaching record highs. No wonder why increasingly more middle-class Americans are finding themselves completely priced out of the housing market.
In fact, the National Association of Home Builders reports that the average new home price is $436,800 in 2023. That's a 32% increase from 2020 when that average was at $329,000. Moreover, at least 500 cities in the U.S. now have an average home price of $1 million. Over that same time span, middle-income earners have seen their salaries rise by 5.1%, U.S. Labor Department data shows. Adding the highest mortgage rates in two decades to the picture, the conditions look even grimmer for would-be buyers this year.
NAHB’s priced-out index estimates that for every 0.5% increase in mortgage rates, 1.3 million households are pushed out of the market. This means that since the third quarter of 2022, an additional 5.2 million families became unable to purchase a new median-priced home. To be fair, more than 70% of Americans don’t earn enough to buy a new home in 2023, according to NAHB’s housing affordability Pyramid. Their calculations revealed that out of 132.5 million American households, 96.5 million of them aren’t able to afford a $430,000 median home.
The combination of the current lack of affordability and weak wage growth, is putting middle-income earners in great danger. A separate report by Primerica reveals that Nearly three-quarters, or 72%, of middle-income families, say their earnings are falling behind the cost of living, up from 68% a year ago, making it harder to live the same
Almost 60% of middle-income Americans said it is very or somewhat unlikely that today’s young adults will have a better life than their parents. And one of the biggest contributors to that decay in their living standards is the lack of access to affordable housing.
In other words, the middle class is literally being excluded from the American dream. If we can’t afford homes, how can we become financially independent? Younger generations are doomed to a future of economic uncertainty and declining quality of life all thanks to the asset bubbles created by reckless monetary policies, inflation, and now the highest mortgage rates in years. We’ve been warned that a great reckoning would come. Now it is clear that the countdown has begun."
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