While there are many factors at play, three major themes appear to be driving a home affordability crisis that has left most of the nation increasingly bearish about their ability to participate in the American Dream.
Rising Interest Rates
With the new normal of working from home and the increased time spent in the house, Americans began searching for housing that met their pandemic-era needs.
These trends set off a wave of home buying. Low inventory and high demand forced prices higher, but falling mortgage rates kept affordability somewhat in check.
What was initially considered transient inflation – the temporary aftershocks of the post-pandemic economic recovery – has settled into the highest year-over-year inflation rates in four decades.
Prices related to home construction have risen even faster than the overall consumer price index, with construction materials alone up 31.3% since January 2020.
Expectation of Rising Prices
Even as home affordability continues to get further out of reach, most Americans expect prices to continue to rise over the next year. 70% of Gallup survey respondents believed that average local housing prices would increase, about the same as a year ago.