Americans have handed the new Congress its marching orders: tackle the affordability crisis that’s keeping so many young people locked out of the housing market.
Housing affordability was one of several key themes that resonated with voters from South Carolina to Texas, Ohio, Montana and beyond, helping more than 40 Democrats to flip seats in both the Senate and House during last week’s midterm elections. Survey after survey point to young people, in particular, who feel downtrodden about the prospect of homeownership—and various indicators underscore why.
Earlier this year came news that the typical first-time homebuyer is now 40 years old, a record high and a sharp increase from even five years ago, when the age was 33, according to the National Association of Realtors. Meanwhile, surging home prices and particularly in areas of the country where wages haven’t kept pace saw the share of first-time buyers fall to a record low of 21% last year and barely budge since then, figures from the Chicago-based trade group show.
But voters will need to see that the new, Democrat-controlled Congress is taking these issues seriously or the party risks being ousted once again in 2028, Donna Brazile, a veteran Democratic strategist, cautioned during a conference hosted by the National Association of Realtors over the weekend.
“Affordability, affordability, affordability. It’s not a slogan that Democrats can use again unless they do something about it,” Brazile said, as reported by Realtor.com.
While Congress passed landmark legislation over the summer with the 21st Century ROAD to Housing Act that targeted boosting the supply of affordable housing, Wall Street also seems optimistic about the implications of a greater focus on affordability. A stock index made up of 34 companies in the homebuilding industry has risen nearly 4.2% since last Tuesday’s close.
HOUSING AFFORDABILITY IN FOCUS
While the housing market has eased in some ways in recent years, it’s not been enough to get many prospective homebuyers in the door of a new home.
The median price of a home on the market, at $415,000 as of October, has fallen nearly 8% from as high as $449,000 in June 2022, according to figures from Realtor.com. But mortgage rates have also risen in recent years, as the average 30-year mortgage rate surged from less than 3% in late 2020 to as high as 8% in late 2023, according to Mortgage News Daily. And rates are still relatively high, at 7.18% currently.
This year has seen the cost of nearly everything increase amid a surge in fuel prices stemming from the war in Iran. To tame inflation, the Federal Reserve raised its benchmark federal funds rate for the first time in more than three years in September—and traders broadly expect that central bankers will do so again in December, which means mortgage rates could remain higher.
While many personal finance experts recommend that people should spend no more than 30% of their pre-tax income on housing costs, many Americans are doing just that. In fact, 29% of homeowners with a mortgage are spending more than this threshold on housing, the third consecutive year of gains, according to the latest data from the Census Bureau, as reported by Investopedia.
To deal with rising housing costs, 59% of renters and homeowners alike say they’re taking steps to manage—either finding additional work or tapping into savings, according to a survey conducted by Experian in September. And the housing market seems like such a lost cause that more than one-third of renters don’t think they’ll ever be able to afford a home despite wanting to, according to a quarterly survey conducted by CNBC and SurveyMonkey.
With the election so squarely focused on the cost of living—and housing affordability—the new Congress has a directive when they convene in January, as Ali Solis, CEO of Solis Strategic Solutions, told Affordable Housing Finance.
“Voters sent a clear message that the cost of rent, homeownership being out of reach, and everyday living cost is way too high,” she said. “People are struggling, and they want Washington to act.”
