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Moreover, the Federal Reserve’s housing affordability index depicts a concerning trend: values have declined sharply, indicating that homes are now less within reach financially than at any point in recent history. The typical buyer with a monthly housing budget of $2,000, for instance, can now afford homes valued at about $295,000 or less—a significant drop from over $400,000 just a few years prior.
The Impact of Rising Mortgage Rates and Prices
Several factors have contributed to this situation. Since the onset of the pandemic era, house prices have consistently risen, fueled by low inventory levels and high demand. Meanwhile, mortgage rates have more than doubled, escalating monthly payments and pushing home affordability to new lows.