The “American dream” of home ownership has become increasingly elusive for many families due to significant challenges in the housing market. To make it attainable for most families again, a major shift is necessary. According to Investopedia’s calculations, a combination of factors such as a 40% drop in home prices, an unprecedented decrease in mortgage rates to 2.45%, or an increase in median household income to $129,096 would be effective in making housing more affordable.
Since the pandemic began, first-time buyers have been particularly impacted by soaring prices and high mortgage rates, making monthly payments on homes unattainable for many. The Federal Reserve Bank of Atlanta’s home affordability index, which measures the ability to afford a home on typical incomes, was at a near-record low of 72.8 in December 2023, compared to 106.7 in February 2020 before the pandemic disrupted the housing market.
The pandemic has led to drastic fluctuations in prices, incomes, and mortgage rates, all of which have contributed to the current affordability crisis in the housing market. It would require significant changes in these factors to bring home affordability back to pre-pandemic levels, and until then, many families will continue to struggle to afford a home.
