With so much attention fixed on soaring prices for gasoline and groceries, one can almost overlook the fact that we’re also enduring an affordable housing crisis. The question is, why?
Spanning the pandemic era from February 2020 through May 2022, home prices soared 43.5%. Over the past 12 months, home prices are up 19.7%, while residential property prices in the United States, adjusted for inflation, are now 6.7% above the prior all-time record levels of the 2006 bubble.
Home prices are increasing far greater than family income growth is. The home-price-to-median-income ratio now stands at more than 8.1, significantly higher than the levels of well under 5.0 experienced from 1980 to 2000. The mortgage-payment-to-income ratio hit 42% in May — tied for the highest level since the creation of the index in 2006. The mortgage payment on a median-priced home with a 20% down payment jumped from under $1,300 to more than $2,000 in just the past year as interest rates and home prices surged — a whopping 56% increase.
