Issues of the ability to withstand housing costs show few signs of mitigation

This story is the second in a series of four parts. Read the first part here.

American homes are far from the reach of millions of Americans, and the Federal Reserve Temporary stopped in the interest rates that the financing costs are likely to offer the real estate market for several months to come.

Standards of the ability to withstand costs show housing costs that pressure family financing, and pressure becomes more intense due to a long -term deficiency in missing housing.

The ability to bear the costs in general was a supreme issue in the 2024 elections, with fencing strategies from Democrats and Republicans on how to deal with it. Fears regarding the power of inflation and doubts about the Trump administration’s macroeconomic policies indicate that the issue – especially in the housing market – can continue in the foreseeable future.

The average price for a new family home in the United States is about 460,000 dollars, according to the National Association for Home Builders (NAHB), a commercial group for residential construction companies. Depending on the mortgage rates at 6.5 percent and current subscription criteria from banks, this price is outside of about three quarters of American families, NAHB was found in March.

Mortgage rates are currently higher than this level at 6.65 percent to get the most popular mortgage for 30 years.

Even homes costing $ 300,000, which are less than the average selling price of $ 398,000 for current homes in February, are very expensive for 57 percent of families.

The National Association of Real Estate Mediators (NAR), as mentioned by the Ministry of Housing and Urban Development, is well in the direction line for 30 years.

Mediterranean families of about $ 800,000 are able to withstand a medium home price. This number appeared until a period of stopping at the end of last year after falling into a negative area in the back half of the year 2024.

Between 2010 and 2023, intermediate income American families were easily able to withstand the costs of the medium price, even in the wake of the epidemic directly. The ability to withstand costs multiplied more than twice the level of a tie in 2014 and reached its last peak at the end of 2021 before slipping into a more strict area with high interest rates.

While the rent and home ownership have decreased over the past few years, the decline in ambitious home owners has been more clear. The ability to afford the ownership costs of the home in NAR has decreased about 80 points, or about 44 percent since 2020.

While the situation was more stable for tenants, it is not stable at a comfortable level. About half of all tenants in the United States spend more than 30 percent of their monthly income on the rent, a threshold reached in 2022, which was not seen within 25 years of data tracking by MOODY.

In the short term, pressure on housing prices is kept by stopping the interest rate discounts from the Federal Reserve.

After raising the rate of lending among effective banks to the highest level since 2001 after the epidemic is enlarged, the US Central Bank began to reduce prices until the end of last year, but it was stopped during its meetings in January and March after the inflation declined and the uncertainty spread around the Trump administration plan for tariffs.

The President of the Federal Reserve, Jerome Powell, said in March that Trump’s tariff may lead to a delay in reducing inflation

He said: “Inflation has started to rise now, and we are partially thinking in response to definitions, and there may be delay in further progress throughout this year.”

This is likely to mean a slower pace for additional price discounts, allowing low mortgage rates, which reduces housing costs in turn. Real estate mortgage prices move more closely with long -term interest rates in the bond market, but they are subject to bank lending rates in the short term.

However, in the long run, housing costs are kept high not in financial conditions but because of the financial shortage of homes at reasonable prices.

“Based on how it is measured, the shortage ranges between 1.5 million to 5 or 6 million,” Daniel Mako, a senior researcher at the Harvard Joint Housing Studies Center, told The Hill. “The truth is that vacancies are still low in the country.”

The lack of housing supplies has been a well -documented phenomenon over the past few years. Why did the residential houses not rush to meet this request, remains an open thing, although McCue from Harvard University said he witnessed the concentration of construction towards low -income consumers.

He said: “The current homes sales have reached its lowest point since the 1990s, but the sales of new homes for one family increased modestly. It is interesting that the prices of new homes have decreased, so they managed to reduce costs and produce a different product to strike a lower price point to help sales.”

There are likely to be other factors that maintain the deficiency in place, including the fact that home builders can often get higher profit margins for distinct homes compared to low -price units and investor behavior who buy large areas of property.

“One of the factors that exacerbate the deficiency is the activity of institutional investors, who buy housing stocks for transition or rent for profit. Big investors purchased 14.8 per cent of homes in the market in the first quarter of 2024-a high percentage of the record,” Bankrase analysts wrote in March.

NAHB indicated a finger when allowing restrictions. From the argument against legislators in the Senate Environment and Public Works Committee earlier this year, NAHB President Karl Harris said that “most land developers have been forced to stay away from certain parcels of land due to uncertainty in the ability to obtain the necessary permits,” said Carl Harris’s president.

Tenants organizers and low -income housing advocates do not agree.

“The standard cancellation is not a strategy to reduce rents, and certainly not in the short term,” Tara Ragofer, Director of the Federation of the Federation, told The Hill. “Even if the housing is built, which will take time, the eternal question is for whom and at what price?”