Americans don't believe middle class can afford homes (2024)
Two-thirds of Americans believe that current housing prices are making the dream of home ownership beyond the reach of the middle class, a new poll for Newsweek showed, a signal that what experts say is a key builder of wealth is too expensive to afford.
Asked if the median sales price of nearly $388,000, per the National Realtors Association's (NAR), was affordable for a middle-class family, 66 percent said "no."
The survey, which was carried out by Redfield & Wilton Strategies for Newsweek on January 18 among 1,500 eligible voters in the U.S., also showed some Americans thought the median cost of a house was lower than what the market was offering, suggesting a gap between expectations and reality when it comes to the housing market in the U.S.
Elevated mortgage rates, expensive homes and lack of enough supply have made buying property in the U.S elusive for millions of Americans. For middle-class Americans, where owning a house can be a builder of wealth and a platform for financial well-being, the dream of acquiring a home has appeared out of reach.
Interest rates on home loans soared to two-decade highs of 8 percent in October, though they have dropped to below 7 percent in recent weeks. But prices have remained elevated.
On Friday, the NAR pointed out that the median asking price for an existing home in December was $382,600, an increase of 4.4 percent from the same time a year ago. Existing home sales fell to their lowest level in nearly three decades on an annual basis as prices increased for the sixth month in a row on a year-over-year basis.
Part of the reason prices are high is the limited supply of homes available for sale. Sellers of homes have been reluctant to put their houses in the market as they would rather retain their properties at the low rates they secured than sell and enter a mortgage market characterized by expensive home loans.
If prices continue to stay high, it could create a gap in the American way of building wealth, housing economists warn.
"Obviously, the recent, rapid three-year rise in home prices is unsustainable," Lawrence Yun, NAR's chief economist, said last week in a statement. "If price increases continue at the current pace, the country could accelerate into haves and have-nots.
"Creating a path towards homeownership for today's renters is essential. It requires economic and income growth and, most importantly, a steady buildup of home construction."
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Elevated mortgage rates, expensive homes and lack of enough supply have made buying property in the U.S elusive for millions of Americans. For middle-class Americans, where owning a house can be a builder of wealth and a platform for financial well-being, the dream of acquiring a home has appeared out of reach.
Aspiring homeowners in the West and Northeast need the most income to afford a typical home. Anyone looking to buy in California, Hawaii, District of Columbia, Massachusetts and Washington must earn between $156,814 and $197,057.
Homeownership, once considered a regular expectation for the middle classes, is now perceived as a loftier goal only attainable to those in the upper echelons of America's class system.
Many have struggled with recent rent hikes, and say they have no savings to fall back on. Stagnant wages, student loans, and low economic mobility created a perfect storm for millennials.
But looking ahead, she said she's concerned about the future: “Rising housing costs, tuition fees, healthcare expenses, and inflation could make life tougher for middle-class families in the next five years.” Huff said it might become harder to afford a home, send kids to college or save for retirement.
The middle class is being affected by a variety of factors including inflation, the aging population and remote work, report shows. The middle class is shrinking as a result of several factors including surging inflation, an aging population, and the rise of remote work, according to a new report from ConsumerAffairs.
"What we are building is at the high end, because of the increased cost of construction and because we have a lot of demand from higher-income renters," says Airgood-Obrycki. Most new apartments over the last decade have gone for $1,400 a month or higher, "and that's not affordable to the majority of renters."
No matter how you finance your home purchase, most experts agree that people should not spend more than 28% of their gross income on housing expenses, and no more than 36% on debt. For example, if you earn $5,000 each month, your ideal mortgage payment should be no more than $1,400 per month.
“Assuming an average interest rate and reasonable debt-to-income ratio, someone with a $75,000 salary could potentially afford a home in the range of $225,000 to $275,000,” he said. Considering modern lending practices, it's not an unreasonable assumption — but trust your math over a lender's offer.
The middle class is the economic stratum between the working class and the wealthy. In the United States, the middle class occupies about half of the population, mainly consisting of people who work in white-collar professions, small businesses, or skilled trades.
Key Takeaways. The American middle class is losing ground financially to upper-income families. The total population of the middle class in the U.S. has remained fairly stable since 2011 but has decreased substantially since 1971.
Where you rank by income. According to the Census Bureau's Income in the United States: 2022 report, the median household income is $74,580 (a 2.3% decline from 2021), while household income levels for each class level are as follows: Lower class: less than or equal to $30,000. Lower-middle class: $30,001 – $58,020.
Millennials Got Cheaper Mortgages Than Their Parents
“As Gen Z looks to buy their starter homes in the next few years, they will face both high rates and high prices. It may be years before the housing market is affordable again,” Allison explains.
Home prices have doubled in the last decade, with much of that growth happening in just the last four years. By one measure, housing affordability has fallen to its lowest level since the 1980s. And high interest rates have exacerbated the problem, ballooning monthly mortgage payments.
More recently, soaring mortgage rates and rising home prices have forced many aspiring home owners to give up on their dream of owning a home. In 2023, mortgage rates rose above 8%. with home prices hiting a new record in June. "Interest rates are increasing and home prices have appreciated quickly since Covid.
A new study from Creditnews.com found that soaring interest rates, inflation and other factors have priced out middle class Americans from purchasing homes in nearly half of the 100 largest metropolitan areas in the country. In 2024, 48 of those metro areas are considered unaffordable for middle class Americans.
In 2012, a household income of $35,364 qualified you as a member of the middle class in the U.S.; in 2022, $50,099 was the lowest minimum household income threshold,” Go Banking Rates lead writer, Gabrielle Olya, wrote in the report. The complete study can be found here.
Yes, programs like VA and USDA loans offer 0% down payment options for eligible low-income buyers. Other programs, such as FHA loans and down payment assistance grants, can help low-income buyers with small down payments.
The rising cost of essential services and stagnant wage growth are straining middle-class families. If current economic trends continue, services such as auto repairs, housekeeping, handyman services, healthcare, and child care may become increasingly out of reach for many households in the next five years.
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