A homeowner’s refrain, oft-heard around the nation’s capital in recent years, has hardened into sobering fact: Most Americans couldn’t afford to buy their own home in today’s market.
Fifty-five percent of U.S. homeowners say they could not raise the funds to purchase their home at current prices and interest rates, according to findings from the 2022 Housing Affordability Survey by Cato Institute released this month.
Housing prices have risen more than 40 percent since the start of the COVID-19 pandemic. A year ago, soaring home values were a point of pride. Now, for potential buyers and sellers, they are a source of fear.
“I think that the psychology is different now, even compared with January of this year,” said Daryl Fairweather, chief economist at real estate brokerage Redfin.
Cato researchers found that 87 percent of Americans are concerned about rising home prices. Three-quarters believe average people would not be able to afford a home in their community. Many fear their own children and grandchildren will not be able to purchase a home.
The facts support their fears. A recent report by the National Association of Home Builders found that three-quarters of Arizona residents would not be able to purchase an average Arizona home at current prices. Other research suggests most renters are priced out of the home-buying market in their own cities.
Interest rates on a standard 30-year mortgage flew past 7 percent this year after starting 2022 around 3 percent, the largest single-year increase in at least 50 years.
The spread between 3 percent and 7 percent interest adds up to roughly $1,000 more in a monthly mortgage payment on the mid-priced American home.
