The American dream of homeownership seems increasingly out of reach for many, with only 28% of homes now affordable for the average household. The maximum affordable home price has fallen to $298,000, a decline of nearly $30,000 since 2019.
Higher mortgage rates are largely to blame, eroding the real-world purchasing power of typical American households. According to Realtor.com chief economist Danielle Hale, higher interest rates have forced many buyers to adjust their expectations, looking for smaller homes or moving farther out.
The rise in borrowing costs has reduced homebuying to its lowest level since the mid-1990s. The 30-year fixed mortgage rate has increased from 2.65% in January 2021 to nearly 6.75%, adding $600 to monthly mortgage payments and an additional $7,200 a year.
In some cities, buying power declines have been particularly steep. Milwaukee saw a drop of 10.5%, while Baltimore and New York City fared worse. However, some metros like Cleveland, Ohio, and Austin, Texas, have seen improvements in buying power due to wage growth.
Source: https://www.foxbusiness.com/lifestyle/only-28-us-homes-now-affordable-typical-american-household-buying-power-drops