Surge in Home Prices Make Homeownership Impossible for Many Americans

A big part of “The American Dream” has always been owning your own home.

It was a major stage in people’s lives. After they met someone they loved and got married, purchasing a home was often the next big life event that would come their way, along with having children.

But, today, that dream of homeownership is really just that for many — a dream.

With a housing market that’s ballooned out of control, and interest rates that, while they’ve come down recently, are sky high, buying a home just isn’t a reality for many people.

Since the end of 2019, the median home sale price in America has increased by almost 30%. This spring, that number reached $420,000.

The International Monetary Fund reports that, even though property values have risen across the globe in recent years, the biggest and most dramatic jump has come in the U.S.

As if the high prices of the homes themselves aren’t tough enough, high interest rates are now providing a double whammy for would-be homebuyers. The average interest rate for a 30-year fixed-rate mortgage sits around 7%. That’s an increase of about 3% from where they stood in 2020 — though many people near the height of the pandemic could get interest rates much lower.

Bankrate and Zillow — two research firms in the real estate industry, say that today’s homebuyers would need to earn an income of more than $100,000 annually to afford a home in a majority of places in the country. Unfortunately, the median household income sits at roughly $75,000.

In addition, over just the last four years, monthly mortgage and interest payments have almost doubled due to the increase in home prices and interest rates.

Megan Holter, a 30-year-old from Austin, Texas, describes the harrowing homebuying process for her and her wife. She told the BBC recently that the couple started looking for homes in the Austin area in 2019, when the average interest rate was about 4.75%.

The couple stopped their search when the pandemic began, and then decided to move 1,200 miles away — to Columbus, Ohio. It’s a location they selected just from a spreadsheet that Holter created of different cities that were not as expensive.

And to do so, they had to swallow an interest rate of 6.625%. As she said of the entire experience:

“It makes me cry a bit. … Housing affordability was the number one thing that we’ve been considering for five years. We have moved mountains to make it possible.

“I’m just eternally grateful that we can afford it. I know a lot of other people cannot.”

The New York Federal Reserve reported recently that only 40.1% of people who currently rent expect to purchase a home one day. That’s the smallest percentage of people since the central bank branch started polling renters about the topic back in 2014.