One month after setting a record low level for affordability, the unaffordability of new homes in the U.S. has skyrocketed.
The mortgage payment for the median new home sold in the U.S. during October 2022 would now consume nearly half the monthly income of an American household earning the median income. The following chart illustrates that development.
And I heard a voice in the midst of the four living creatures saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not harm the oil and the wine.” Revelation 6:5-6
This negative change is primarily the consequence of rising mortgage rates, which have been pushed upward as the U.S. Federal Reserve has sought to make borrowing more expensive in its attempt to stall and reverse President Biden’s inflation in the U.S. economy. The next chart shows how mortgage rates have exploded during 2022 in response.
As mortgage rates have exploded, median new home prices have remained elevated, holding down their raw level of affordability with respect to median household income itself. The third chart confirms the raw affordability of new homes has hit a new low in that measure.