A report from the National Association of Realtors claims that home and car ownership is increasingly out of reach for middle-class Americans as the cost of living crisis escalates. The report states that the monthly cost of a car loan now exceeds what the average American can afford, and the home affordability index has fallen from 169.9 points in 2020 to 87.8 points in July this year. The primary driver is inflation, which hit 9.1% in June last year and is linked to high government spending, experts say.
Desmond Lachman of the American Enterprise Institute said, “Both housing and automobiles have become increasingly less affordable to American households as a direct result of the Fed having to raise interest rates to curb inflation.”
Among the examples of high government spending is the America Rescue Plan, designed to provide relief after the coronavirus pandemic at a cost of $1.9 trillion. The scheme provided a cash injection of $1,400 for individuals earning less than $75,000 and $2,800 to families earning less than $150,000. The Plan also covered vaccine costs and pension bailouts.
Adding to economic concerns for the average American, the Fed has raised interest rates 11 times since 2022, bringing them to above 5%. House prices have also increased by between 10 and 15%, to a median of $412,300 in July. This is compared to an average price of $300,200 in 2020.
Meanwhile, inflation degrades wages, creating an alarming economic outlook for many households. Median weekly earnings declined by 7.1% in the second quarter of 2023, having reached an all-time high in 2020. Car insurance costs are likewise rising, along with the costs of repairs. Insurance is up 19.1%.
The federal situation is little better, with the nation’s debt ballooning. For example, the national debt reached $33 trillion in September – an increase of more than $5 trillion since Biden entered the White House. By comparison, debt rose by $2.48 under President Trump and $4.03 under Obama.