Why it's getting even harder to rent or buy a home
Mortgage rates have surpassed 6% and home prices remain just off the record highs hit in recent months, pricing many prospective homebuyers out of the market.
With inflation pushing most household expenses higher, few prospective home buyers can afford those pricier monthly payments.
Americans are now spending more than 35% of their median income on monthly principal and interest payments for that newly purchased median-priced home.
Historically, Americans spent closer to 25% of median income on payments.
Now buyers are grappling with a combination of high home prices and rising mortgage rates.
Typically, as demand dries up, prices will come down and eventually mortgage rates will settle.
For the time being, however, mortgage rates are likely to rise even more as the Federal Reserve continues to raise interest rates in its battle to fight inflation.
Instead, mortgage rates tend to track the yield on the 10-year US Treasury.
As investors anticipate the Fed’s rate hikes, they often sell government bonds, which sends the yield higher and, with it, mortgage rates.
Most housing policy experts say that building a steady supply of new, moderately priced homes is needed to fix the affordability crisis.
In May, the Biden administration announced a Housing Supply Action Plan to close the affordability gap and ease housing costs.
These programs include down payment assistance, lower mortgage insurance premiums and a credit reporting system that factors in rent payment history.