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The affordability strained housing market, as told by one chart
A borrower's income would've needed to rise by over 86% since January 2020 to keep pace with the increase in the cost of owning a median-priced U.S. home.
Lance Lambert
October 18, 2024
Today’s newsletter is brought to you by ResiDay!
On Friday, November 8th, in New York City, ResiClub will host ResiDay, bringing together the brightest minds in the housing market. This will be our first-ever one-day conference.
There will be hundreds of influential housing investors, developers, lenders, and brokers who are shaping the future of residential real estate, homebuilding, mortgage lending, and build-to-rent at ResiDay. Several prominent business and real estate journalists will also be there.
The ResiClub team will lead a day of insightful discussions on market trends and strategies impacting the future of the U.S. housing landscape. Expect top-tier speakers, ample networking opportunities, and hours of engaging discussions on the future of the U.S. housing market.
Over the past few years, we’ve witnessed the fastest-ever deterioration in housing affordability. To understand the current affordability pinch, just look at the updated analysis published by the Federal Reserve Bank of Atlanta on Thursday.
U.S. median household income in January 2020👇
$65,925
U.S. median household income in August 2024 👇
$85,255.13
"Qualified income" to afford U.S. median home in January 2020 👇
$64,257
"Qualified income" to afford U.S. median home in August 2024 👇
$119,870
Click here to view an interactive of the chart below
Increase in U.S. median household income since January 2020 👇
+29.3%
Increase in income needed to keep up with the rise in costs to own a median-priced U.S. home since January 2020 👇
+86.6%
During the Pandemic Housing Boom, housing demand surged rapidly amid ultralow interest rates, stimulus, and the remote work boom. Federal Reserve researchers estimate “new construction would have had to increase by roughly 300% to absorb the pandemic-era surge in demand.” Unlike housing demand, housing supply isn’t as elastic and can't quickly ramp up. As a result, the heightened demand drained the market of active inventory and overheated home prices, with U.S. home prices in July 2024 a staggering 53.4% above January 2020 levels.
That overheated home price growth, coupled with the ensuing mortgage rate shock, with the average 30-year fixed mortgage rate jumping up from 3.0% to over 6.5%, has created the fastest ever deterioration in housing affordability.
What can the U.S. do to improve housing affordability? It’s a tough question—but here are some thoughts.
First, simply give the market time and make smart fiscal and monetary decisions. If you do that right, over time, incomes rise and mortgage rates should fall some, helping to alleviate some of the historic housing affordability strain created by the accelerated pandemic housing demand boom and the ensuing rate shock.
The uncomfortable truth is that improving housing affordability might not be as easy or straightforward as some think. But just like with a Lego structure, sometimes it's easier to identify what might break it (subsidies that accelerate homebuyer demand) than to fix it.
Tomorrow, ResiClub PRO members will get a detailed analysis looking at home prices in over 800 metros and 3,000 counties. We do this analysis once per month.
PRO members will also get a deep look at home insurance changes across the country—down to a county level.
Over the past month, the U.S. Southeast has been hit by two major hurricanes.
To find out how much potential damage has been caused by the hurricanes, ResiClub reached out this week to get Moody’s Analytics chief economist Mark Zandi’s property damage estimates.
LOW ESTIMATE
Milton: $40B
Helene: $31B
HIGH ESTIMATE
Milton: $70B
Helene: $49B
Combined, Moody's estimates that Helene/Milton will be somewhere between $71 billion and $119 billion property damage. "Property damage" meaning both commercial and residential property.
For perspective: Hurricane Ian, which hit Florida in September 2022, caused around $112 billion in damage, according to FHFA.
Over the past week, ResiClub PRO members got these 3 additional research articles:
Are you a real estate investor? Do you own rental property? 🏠
If so, you’re invited to participate in the Flock Homes-ResiClub Real Estate Investor Survey.
The survey results will be published later this month in ResiClub—and in other mainstream media publications.