Millions of Americans Can No Longer Afford a House

By Douglas A. McIntyre Published Oct 18, 10:30AM EDT

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Millions of Americans Can No Longer Afford a House — © AlenaMozhjer / iStock via Getty Images

Residential real estate was fairly cheap before the pandemic, or at least cheap compared to today. A land rush for homes in many cities changed that across most of the country. Higher mortgage rates also have attacked affordability. The number of Americans who cannot afford a house has soared by millions in the past several months.

While moderate home prices helped affordability in 2018 and 2019, a drop in mortgage rates to 3% for 30-year fixed mortgages brought home prices into range for people who could not be home buyers financially. Usually, this was measured by the income-to-median home price ratio in each market.

Realtor.com’s recent Every Time Mortgage Rates Rise, Buyers Need to Make This Much More to Afford a Home report shows the effect of home prices and mortgage rates on the number of people who can buy a home in America. It is based on data that covers 128 million homes. Rocke Andrews, a mortgage broker at Lending Arizona, told Realtor.com: “It’s basically a frozen market until prices come down more or rates come down, or both.”

As the Federal Reserve raises interest rates, mortgage rates will not decrease but will rise.
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Realtor.com says the median home price in the United States is $427,250. The average mortgage rate is 6.7% for a fixed-rate loan. Based on this, a buyer must have a median annual income of $124,000 to buy a home under these circumstances.
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The study concludes that 20 million Americans who could afford a home last year can no longer do so. This also means only 36 million people can buy homes today, based on the Realtor.com formula. At 3% mortgage rates, the comparable number was 54 million.
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The national real estate market will be ruined if mortgage rates move above 10%. The number of people who can buy a home has dropped to 23 million. Demand, based on the residential real estate market over the past decade, has disappeared.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.