Trying to buy a house is a ‘game you can’t win’

Image source, Nathan Wilkins

  • author, Natalie Sherman
  • Role, Business correspondent, BBC News

When Nathan Wilkins moved back in with his mother and sister in 2019, he hoped it would help him save money to buy a house.

But in the years that followed, the U.S. housing market was transformed by rising rents, rising home prices, and a huge jump in mortgage rates, which made homeownership look increasingly impossible.

The 32-year-old insurance adjuster from Utah says he and his sister are making more money than ever. But paying $2,500 (£1,960) a month for rent doesn’t leave much money.

“It’s like I’m playing a game you can’t win,” he says. “The fact that we’ve been priced out makes me want to puke.”

Such frustrations are widespread, fueling dissatisfaction and contributing to the spread of pessimism about the American economy, which clouds the country’s upcoming elections.

the Average home selling price In the United States by nearly 30% since the end of 2019, reaching $420,000 this spring.

And that doesn’t take into account additional costs from higher interest rates, which are now about 7% for a 30-year fixed-rate mortgage that is typical in the U.S., up from about 3% in 2020.

Today’s homebuyers need an annual income of more than $100,000 — much higher than the nation’s median household of about $75,000 — to comfortably afford a home in most places in the United States, say research firms like Zillow And Pancreatic He says, and face the monthly payments that have Almost doubled In just four years.

Image source, Getty Images

Comment on the photo, Megan Holter (right) and her wife Sonya outside their new home in Columbus, Ohio

“It makes me cry a little bit,” says Megan Holter, who started looking to buy in Austin, Texas, in 2019, when banks were offering her a 30-year fixed rate of about 4.75%.

She and her wife finally bought a house this year, but only after swallowing a 6.625% interest rate — and moving 1,200 miles north to Columbus, Ohio, a place chosen from a spreadsheet she created of cities with lower costs.

“Housing affordability was the number one thing we were thinking about for five years,” says the 30-year-old, who also switched jobs from the public sector to the private sector to achieve home purchases.

“We moved mountains to make this possible.

“I’m forever grateful that we can afford it. I know a lot of other people can’t,” she adds.

Only 40.1% of renters expect to one day own a home, according to a report New York Federal ReserveIt is the smallest share since the bank started asking tenants in 2014.

Even homeowners, whose long-term mortgages protect them from the direct financial impact and who benefit from rising property values, Tell the polls Changes in the market are a concern – because they lead to higher property taxes and insurance costs, while making the prospect of moving less expensive.

a Latest Harris Poll It found that more than 70% of Americans believe the market will get worse.

Image source, Getty Images

This problem feeds into broader concerns about the rising cost of living, which has jumped 20% since 2021.

This is among the biggest challenges facing President Joe Biden, whose term has coincided with a housing market turnaround and who has received poor ratings for his handling of the economy in national polls.

Rival Donald Trump, who has fared better, has sought to blame Biden for inflation, and although he does not usually refer to housing specifically, he regularly highlights “skyrocketing” interest rates to say the economy is on track. Wrong direction.

In recent months, the White House has tried to address affordability concerns head-on, introducing proposals such as rules to limit closing costs and a $10,000 tax credit for first-time homebuyers.

This represents a shift in tone, after years of focusing on the economy’s strengths, including low unemployment rates. But with few direct influences Biden can pull, it’s not clear these efforts are having an impact.

His support has eroded particularly among young people, whose record turnout in 2020 helped propel him into office. Voters in this demographic are less likely to own homes, and are more likely to see housing affordability as a major concern.

“I don’t see any platform that is intentionally looking for people like first-time homebuyers who want to ease their pain,” says Brayden Dougherty, a 30-year-old from Florida who works in manufacturing and inspects homes daily. For three years.

Despite a $50,000 inheritance, no debt, and decent job opportunities, he and his wife can’t find an affordable two-bedroom apartment near their families in the Orlando area.

He says the problem of housing costs is too big for any politician or party, but the apparent lack of solutions has contributed to his broader political disillusionment. He’s not sure how he’ll vote in November.

“I’m fed up,” he says. “Housing is part of it.”

The growing protest has increased pressure on the US central bank to cut interest rates to achieve relief, a move that Federal Reserve Chairman Jerome Powell said was likely at some point.

But expectations that the cut would happen early this year, helping improve the country’s mood, have steadily declined. This reflects fears that progress in lowering inflation – which was hovering at 3.4% in April, well above the bank’s 2% target – is faltering.

Image source, Julia Makhnatkina (JM Photos Inc)

Comment on the photo, Mimi Than and her husband are among those affected by the rise in interest rates this year

Mimi Than, 29, who recently bought a three-bedroom apartment in the Boston area, Massachusetts, says she faces monthly costs about $200 more than when she and her husband got pre-approved for a loan in March.

If they do not fix the interest rate at that time, their unaware borrowing costs may change dramatically. When they returned to their lender in April after making an offer, the interest rate they were offered was 6.9%, up from 6.5%.

She hopes they will relent later this year, allowing them to refinance.

“I obsessively check prices,” she says.

Many analysts believe that it is only a matter of time until inflation slows, paving the way for lower inflation.

They point to reports from private companies that show rent increases — which play a big role in U.S. inflation calculations — are cooling the blistering pace of the pandemic amid a jump in apartment supply.

As wages grow, more new homes are under construction, and rents and home prices rise more slowly, Urvi Devungi, chief economist at housing site Zillow, says he sees affordability challenges declining as well — though not in time for the November election.

Image source, Getty Images

Comment on the photo, New home construction has increased significantly from pre-pandemic levels, but supplies remain short of demand

“It works on its own,” he says. “We still have a long way to go, of course, but we are seeing some improvement and I think we will see more improvement.”

But there is a bleaker point of view.

As homelessness rises, rental prices may prove more resilient than expected, keeping inflation high.

If mortgage interest rates do not fall significantly, the gradual change in borrowing costs may act as a long-term constraint on supply, with builders pulling out and homeowners who guaranteed mortgage loans when interest rates were lower refraining from moving.

Brayden, of Florida, doesn’t see an easy solution from the Fed, which he fears helped shape the current crisis by allowing interest rates to remain unusually low in the decade after the 2008 financial crisis.

“No matter what happens — whether they raise it, lower it or keep it — I feel as though the next decade is probably going to be difficult no matter what happens for most people,” he says.

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