Anyone looking to buy a house knows that this is not a great time. During the pandemic, mortgage rates were at their lowest level in history and housing was cheaper. It took just about 20% of the median family income to pay for a mortgage with 20% down. Today, mortgage interest rates are up — the 30-year fixed rate is currently 7.63% — and so are home prices. Americans need about 35% of their income to pay for a mortgage, which is higher than at the peak of the so-called housing bubble in the early 2000s.
Unfortunately for homebuyers, there is almost no hope that we’ll return to the affordable housing days of 2020. More concerning, there is little indication that recent trends will reverse or that homebuying will get much more affordable in the near future.
The main reason homebuyers are struggling is that the cost of borrowing has gone up for everybody. After a burst of inflation, the Federal Reserve increased interest rates at one of the fastest paces in its history. The Fed has taken its target interest rate from near zero at the beginning of 2022 to almost 5.5% today.
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Judge Glock is the director of research and a senior fellow at the Manhattan Institute and a contributing editor at City Journal.
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