Trying to buy a house is ‘playing a game you can’t win’ – 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 since, the U.S. housing market has been transformed by rising rents, rising home prices and a huge jump in mortgage rates, making homeownership seem increasingly impossible.

He and his sister are making more money than ever, says the 32-year-old insurance expert from Utah. But if you pay €2,500 per month in rent, there is not much left.

“It’s like playing a game you can’t win,” he says. “The fact that we’re being priced out just makes me want to throw up.”

Such frustrations are spreading, fueling discontent and contributing to the widespread pessimism about the U.S. economy that is looming over the country’s upcoming elections.

The average home sales price in the U.S. has risen nearly 30% since the end of 2019, reaching $420,000 this spring.

And that’s not even taking into account the added cost of higher interest rates, which are now about 7% for the 30-year fixed-rate mortgage typical in the US, up from about 3% in 2020.

Homebuyers today need an annual income of more than $100,000 — well above the median household average of about $75,000 — to comfortably afford a home in most places in the U.S., say research firms like Zillow and Bankrate, and face monthly payments that have roughly doubled. in just four years.

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

She halted her search when the pandemic hit, priced out by the rising costs of building materials and homes.

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

“Housing affordability was the most important thing we were thinking about for five years,” says the 30-year-old, who also changed jobs from the public sector to the private sector to enable home buying.

“We have moved mountains to make this possible.

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

Only 40.1% of renters expect to ever own a home, according to the New York Federal Reserve, the smallest share since the bank started asking renters this question in 2014.

Even homeowners, whose long-term mortgages protect them from immediate financial consequences and who benefit from rising property values, tell pollsters that the market changes are a concern — because they are driving up property taxes and insurance costs, while relocation is a major threat. less affordable prospect.

A recent Harris poll shows that more than 70% of Americans believe the market will only get worse.

The issue fuels broader concerns about the rising cost of living, which has risen 20% since 2021.

It is one of the biggest challenges facing President Joe Biden, whose term in office has coincided with the transformation of the housing market and who has received dismal ratings in national polls for his handling of the economy.

Challenger Donald Trump, who is doing better, has tried to blame Mr. Biden for inflation, and while he generally doesn’t mention housing specifically, he regularly points to “skyrocketing” interest rates to argue that the economy is heading in the wrong direction. goes up.

“Inflation has been a political drag for Biden in recent years,” said Brian Connolly, a professor of business law at the University of Michigan’s Ross School of Business, whose work focuses on housing issues. “Housing costs are another place where people are experiencing this financial pressure.”

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

It marks a change in tone after years of focusing on the economy’s strengths, including low unemployment. But with Biden having few immediate levers to pull, it is not clear the efforts are resonating.

His support has waned especially among young people — whose record turnout in 2020 helped him into office. Voters in this demographic group are the least likely to own a home and are most likely to view housing affordability as a top priority.

“I don’t see any platform that is purposefully targeting anyone as a first-time home buyer, wanting to ease their pain,” said Braiden Dogherty, a 30-year-old from Florida who works in manufacturing and checks on homes daily. for three years.

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

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

“I’m tired of it,” he says. “Housing is part of that.”

The growing outrage has increased pressure on the U.S. central bank to cut rates to provide relief, something Federal Reserve Chairman Jerome Powell is likely to do at some point.

But expectations that a cutback would take place early this year, which would help improve the mood in the country, have been steadily pushed back. This reflects concerns that progress in lowering inflation – which hovered at 3.4% in April, still well above the bank’s 2% target – could stagnate.

Instead, mortgage rates have largely risen since January.

Mimi Than, a 29-year-old who recently purchased a three-bedroom apartment in the Boston, Massachusetts, area, says she’s facing about $200 more in monthly costs than when she and her husband were pre-approved for housing in March. a loan.

They did not fix the interest rate at the time, because they were not aware that financing costs could shift significantly. When they returned to their lender in April after making an offer, the interest rate they got was 6.9%, up from 6.5%.

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

“I obsessively check rates,” she says.

Many analysts argue that it is only a matter of time until inflation slows down, paving the way for a reduction.

They note reports from private companies showing that rent increases — which play a big role in U.S. inflation calculations — are cooling from the pandemic’s torrid pace amid a jump in apartment supply.

With wages rising, the number of new homes under construction rising and rents and home prices rising more slowly, Orphe Divounguy, a senior economist at housing site Zillow, says he also sees affordability issues easing — although not in time for the November election.

“It works itself out,” he says. “Obviously we still have a long way to go, but we are seeing some improvement and I think we will see more improvement.”

But there is a bleaker picture.

With more and more people unable to buy their own homes, rental prices may prove more resilient than expected, keeping inflation high.

And if mortgage rates don’t fall significantly, the incremental change in borrowing costs could become a drag on supply in the long run, as builders pull back and homeowners who took out mortgages when rates were lower refrain from moving.

Florida-based Braiden sees no easy solution from the Fed, which he says helped shape the current crisis by allowing interest rates to remain unusually low in the decade after the 2008 financial crisis.

“Whatever happens — whether they’re up, down or held — I feel like the next decade is probably just going to be tough for most people,” he says.