Thanks, Joe! Americans Struggle As Homeownership Becomes Unattainable Across The Nation

By Greg Moriarty | Tuesday, 02 April 2024 11:59 PM
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The affordability of homes in the United States has been a growing concern under President Biden's administration, with a recent study revealing that a six-figure salary is now a prerequisite for purchasing a median-priced home in nearly half of the 50 states as of January.

This is a stark contrast to the situation in January 2020, a year before Biden assumed office, when only six states and Washington, D.C., required such high earnings.

Despite the administration's claims of making strides towards making homeownership a reality for Americans across the country, it concedes that housing costs remain prohibitively high for many potential homeowners, a problem it attributes to legacy issues.

The study conducted by Bankrate indicates a significant increase in the number of states where a six-figure salary is necessary to afford a median-priced home. In January 2020, this was the case in six states and Washington, D.C. By January 2024, this number had surged to 22 states, in addition to the nation's capital. The median home price, according to real estate brokerage Redfin, was pegged at $402,343.

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As per the report, prospective homeowners need to earn an annual income of $110,871 to afford such a home, marking a 46% increase from January 2020. "Affordability is the biggest issue – finding a home that’s in your budget," commented Jeff Ostrowski, a housing market analyst at Bankrate. "The higher the price of a home, the harder it is to come up with the down payment or to qualify for the monthly payment."

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The report further highlighted the states that have seen the most significant increases in the required annual income: Montana (+77.7%), Utah (+70.3%), Tennessee (+70.1%), South Carolina (+67.3%), and Arizona (+65.3%). Conversely, the states with the smallest increases were North Dakota (+9.2%), the District of Columbia (+24.6%), Louisiana (+24.9%), Illinois (+27.2%), and Kansas (+29.3%).

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The study also identified the states that require the highest annual income to purchase a typical home in 2024, primarily located in the West and Northeast. These include California ($197,057), Hawaii ($185,829), D.C. ($167,871), Massachusetts ($162,471), and Washington ($156,814). On the other hand, the states requiring the least annual income to afford a typical home in 2024 are Mississippi ($63,043), Ohio ($64,071), Arkansas ($64,714), Indiana ($65,143), and Kentucky ($65,186).

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Despite a 4.3% wage growth in February, the escalating home prices continue to outstrip what Americans can afford. "Homes have become less affordable because home price appreciation has so far outpaced wage growth," Ostrowski explained. He attributed the rapid rise in home prices to supply and demand dynamics, with more buyers than sellers in the market.

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Elevated mortgage rates are also contributing to the limited supply, as potential sellers locked into a 2% or 3% mortgage rate are reluctant to sell and assume a higher mortgage rate for a new home purchase. When Biden took office in January 2021, the average interest rate on a 30-year fixed-rate mortgage hit a new low of 2.5%. As of March 20, Bankrate's survey of large lenders showed these rates had climbed to 7.07%.

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Housing affordability is likely to be a key issue for voters in the 2024 presidential election. A recent survey from Redfin found that over half of the 3,000 participating homeowners and renters admitted that the issue would influence their vote in November.

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In response, last month, Biden unveiled a series of initiatives aimed at improving affordability as he seeks re-election. These include a call for Congress to pass a mortgage relief credit that would provide middle-class first-time homebuyers with an annual tax credit of $5,000 a year for two years. He is also urging Congress to provide a one-year tax credit of up to $10,000 to middle-class families who sell their starter home. Additionally, the Biden administration is advocating for legislation to build and renovate over 2 million homes to close the housing supply gap and reduce costs for renters and buyers.

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