Real estate

Why is US housing so unaffordable?

Home is where we relive our life. It is one of the basic requirements than, other essential things, that we need to live a peaceful life. But the stumbling block is not everyone can afford a place that they can call theirs. There are a few reasons behind- why housing is unaffordable.

  • Income has decreased compared to housing costs: According to the National Association of Realtors,  the average price of a house in June 2023 was $410,200.  it is the second-highest price tag since the NAR started to track the data.  The all-time high was in June 2022, when the average price reached $413,800. 
  •  It should also be noted that the average income in America is $71,214. ATTOM says the average revenue earned can’t afford 99% of average home prices. 
  • Aggressive interest rates:  due to continuously increasing interest rates, the average income earned spends a large portion of his income on homeownership expenses, up to 35%.  it is an unaffordable ratio according to common lending standards because the debt-to-income ratio is recommended to be 28%. 

The recent increase in interest rate by the Federal Reserve is quite aggressive because it is the first time in 2 decades that the mortgage rates are above 7%.  

  • Rising demand for housing:  Even though the mortgage rates have increased nearly double in the past 3 years, the house prices have remained relatively stable.  The primary common reason is there are very few houses available for sale.  Most owners who bought their houses at low mortgage rates before the pandemic are not ready to sell their homes.  This limits the options for buyers. 

 It should be noted that the number of available homes on the market at the end of July was 9% lower than the previous year.  The housing shortage and rising consumer demand are responsible for continuously hiking average house prices in the US.

 

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