Our long-standing housing crisis has deepened exponentially. Housing affordability in the United States has fallen to historical lows. New data from the National Association of Realtors shows just how bad it’s gotten—especially lately. Despite a 15% increase in median home prices over the last year, average wages have just gone up 3%. This gap along with increasing interest rates is making homeownership an increasingly distant dream for many Americans.
Indeed, experts say these are the worst market conditions for first-time homebuyers. The typical down payment just hit a record high of about $60,000. This exorbitant spike makes homeownership an insurmountable barrier for many households hoping to access the housing market. According to recent reporting, about 70% of would-be buyers are currently looking to push their purchase down the road or give up on it entirely.
The rental market isn’t offering much comfort, either. Rent prices have skyrocketed, with cities across the country experiencing greater than 10 percent increases in the last year alone. This alarming trend is forcing hundreds of thousands of renters to allocate an even larger share of their income towards housing expenses. It has since ballooned to about a third — 30% nationwide on average.
I know the challenges rent and cost of home ownership, made all the worse by a lack of homes available. The supply of homes for sale has fallen by more than a quarter from a year ago. As a result, bidding wars are the new normal, driving up prices even more and pushing out buyers that aren’t able to compete in these cutthroat settings.
Economic analysts are beginning to wake up to what the accumulated impact of these trends might mean for different demographic cohorts over the long-term. Low-income families and minorities are disproportionately susceptible, too, as they tend to have less financial capacity to adapt to the conjoining worsening wave. Furthermore, research shows homeownership rates are falling for these groups, exacerbating socioeconomic divides.
To combat these challenges, local governments and organizations have started to taking creative approaches to making housing more affordable. Cities and states are steps ahead, enacting rent control and loading up on cash to create new affordable housing. Still others are pushing their state legislatures to change localities’ zoning authority to increase the supply of affordable, small-scale housing.
Furthermore, federal initiatives aimed at reducing interest rates and providing financial assistance to first-time buyers have gained traction in recent legislative discussions. Based on extensive expertise and experience, critics believe such measures would be inadequate to overcome the extreme market inequities now stacked against them.
As the crisis continues, many citizens are calling for more substantial government intervention and innovative solutions to address the affordability issue. The stakes couldn’t be higher. An increasing number of families stand to be pushed into the cycle of intergenerational financial instability due to increasing housing costs.