Mortgage rates and prices

Consumer prices rose 3.3% in May from the same time a year ago, which is down from the peak of about 9%, but still higher than the Federal Reserve’s 2% target. The central bank has hiked interest rates in an attempt to bring prices back down and its policymakers project just one rate cut this year.

The Fed raising rates contributes to higher mortgage rates. In fact, the National Association of Realtors (NAR) recently reported that the monthly mortgage payment on a typical, existing single-family home with a 20% down payment was $2,037 in the first quarter. That’s an incredible 9.3% increase from a year ago.

But higher mortgage rates haven’t reduced demand and brought home prices down. Compared to one year ago, the national median single-family existing-home price climbed 5% to $389,400.

"Astonishingly, greater than 90% of the country's metro areas experienced home price growth despite facing the highest mortgage rates in two decades," said NAR chief economist Lawrence Yun. "In the current market, rising prices are the direct result of insufficient housing supply not meeting the full demand."

If you think you’re off the hook as a renter, then think again. Rents across the U.S. have been rising at an average of 1.5 faster than wage growth since 2019, as per StreetEasy.

You might be wondering why housing affordability is hurting Gen Zers more than their older counterparts. Redfin says just over one-quarter (26.3%) of adult Gen Zers owned a home in 2023, little changed from 26.2% in 2022. Why? High mortgage interest rates coupled with no home equity to put toward a new home (like Gen Z’s older counterparts have been able to do) have made matters exceedingly more difficult for them.

Biden’s housing plan

In March, President Biden announced a plan to lower housing costs for working families. His 2025 fiscal year budget includes $258 billion in housing investments to “build or preserve over 2 million housing units.”

Among several initiatives, it proposes a $10,000 middle-class mortgage relief tax credit to first time home buyers, a one-year tax credit of up to $10,000 to middle-class families who sell their starter home, and $25,000 in down payment assistance to first-generation homebuyers.

Meanwhile, although Trump hasn’t announced detailed plans, his reelection is seen as a move toward the privatization of government-sponsored entities (GSEs) Fannie Mae and Freddie Mac.

To add, Democratic Rep. Maxine Waters from California recently sponsored the Strengthening Housing Supply Act of 2024. If passed, the bill will allow for the use of the Community Development Block Grant, which is federal assistance to state and local governments to support neighborhood and housing development, to pay for the construction of new affordable housing across the U.S.

It’s clear that housing affordability is no joke in today’s America and the issue will certainly be a key factor when voters head to the polls this November.