(ConservativeJournal.org) – Amidst surging mortgage rates and escalating property prices, middle-class households find themselves increasingly excluded from the housing market, creating a potential threat to the middle class American dream of home ownership. Around 75 percent of homes currently available are beyond the financial reach of the middle class, according to data from the National Association of Realtors.
The surge in home loan interest rates, currently hovering around 7 percent, is the most pronounced since the early 2000s. This spike is attributed to aggressive rate hikes by the Federal Reserve aimed at combating inflation. Simultaneously, the housing supply has diminished due to a combination of insufficient construction and sellers holding back from the market, reluctant to relinquish the low rates secured in prior years.
This scarcity has led to a considerable increase in property prices, rendering the act of purchasing a home the most expensive it has been this century. Elevated down payments, exorbitant monthly mortgage payments, and limited affordable options exacerbate the challenges faced by middle-class Americans in realizing home ownership.
Owning a home is traditionally viewed as a cornerstone of financial success, providing families with a platform to build future wealth. Approximately half percent of Americans earning a median annual salary of $75,000 can usually afford a home valued at around $256,000. However, the median home price in the US stands at $431,000, significantly surpassing the affordable range for many middle-class households.
High homeownership costs extend beyond the initial purchase, impacting property insurance. Over the past two years, home insurance prices in the US have surged by 35 percent, as climate change-related disruptions contribute to increased risks.
Jessica Lautz, Deputy Chief Economist at the National Association of Realtors, emphasizes the wealth-building aspect of homeownership. A typical homeowner accumulates nearly $400,000 in housing wealth compared to a mere $10,000 for renters. Danielle Hale, Chief Economist at realtor.com, highlights that homeownership serves as a built-in savings plan, with monthly mortgage payments contributing to both debt reduction and wealth accumulation. Despite these financial advantages, rising costs and limited affordability pose substantial challenges for middle-income Americans striving to attain homeownership.
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