by Eric Lendrum
The current cost of a median-priced home has now reached a rate of increase that is twice as high as the increase in the average American household income.
As the Daily Caller reports, the median monthly home payment for the month of February was $2,838, a 12 percent year-over-year increase. Meanwhile, the median household income is currently at $84,072, an increase of just 6 percent compared to last year. While the average income rate has roughly been on par with the cost of a new home for the last decade, the drastic change began in early 2022, when the average household income needed for a new home hit its current median of $113,520 a year.
While housing prices have slightly moderated compared to a record-high in October, they remain unusually high; in October, the average rate for a 30-year mortgage was about 8 percent, compared to the current rate of 7 percent, according to the Federal Reserve Bank of St. Louis. Inflation, supply constraints, and increasing mortgage rates are all cited as contributing factors to the increasingly high average payments.
“For over a decade, America has been slowly marching toward a housing affordability crisis due to chronic underbuilding, and that crisis was kicked into overdrive when the pandemic homebuying boom fueled a meteoric rise in housing prices,” said Elijah de la Campa, a senior economist at Redfin and author of Redfin’s report detailing these increases. “Now there’s another culprit squeezing homebuyers: elevated mortgage rates. We’re slowly climbing our way out of an affordability hole, but we have a long way to go. Rates have come down from their peak, and are expected to fall again by the end of the year, which should make homebuying a little more affordable and incentivize buyers to come off the sidelines.”
Even as inflation has remained relatively high, home prices have risen higher than the rate of general inflation. The Case-Shiller National Home Price Index increased by 6 percent in January year-over-year, compared to a 5.6 percent increase in December. Inflation rose by 3.2 percent in February, surpassing the Federal Reserve’s expectations of a 2 percent increase.
In the latest attempt to combat inflation, the Fed set its federal funds rate to a new range of between 5.25 percent and 5.50 percent, the highest it has been in 23 years.
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Eric Lendrum reports for American Greatness.Â
