Reviving the American Dream: Restoring Affordable Housing for All

Housing affordability in the United States has dropped by nearly half since the ultra-low interest rate days of 2021, with mortgage rates reaching a 23-year high. The recent surge in rates has moved five million U.S. families below the qualification standard for a $400,000 loan. Affordability depends on family income, house prices, and mortgage rates, and all three indicators face challenges in returning to normal. To make housing affordable again, mortgage rates would need to fall to 5.5%, median home prices would need to fall by 22%, or median income would need to increase by 28%, or some combination of all three variables. However, these numbers underestimate the challenge, and it would take years of building more homes to address the housing shortage. The Federal Reserve's monetary policy and the hypersensitive bond market are also contributing to the problem, making it unlikely that rates will significantly decrease in the near future.