Home affordability has fallen sharply over the past 40 years. Incomes have not kept pace with rising home prices, and the share of income to house prices has dropped from around 30% to below 20%. While home prices are a key factor in affordability, interest rates play an equally critical role. As rates rise, monthly mortgage payments increase, reducing purchasing power and making homes significantly less affordable. This dynamic is relevant today as the current administration advocates for lower interest rates, however, monetary policy decisions ultimately rest with the Federal Reserve.
Source: U.S. Census Bureau; U.S. Department of Housing and Urban Development, The Business Week Graphic
This graph was produced by Lucas Juery, CFA, CFPⓇ and is not intended to provide financial advice.
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