It is tough to judge world economies at this moment. COVID lockdowns produced supply issues, rapidly dropping markets, high inflation, and low interest rates. Post-COVID, supply chains have fixed themselves, markets have roughly stabilized, and inflation is being dealt with (slowly) by rising interest rates.
Yet, economists still cannot figure out whether or not we will hit a recession by the end of 2023 or the beginning of 2024. There is one part of the market that economists know is hurting Americans: the housing market.
The median price for a single-family home in the United States is $410,200. The median salary in the United States is $61,937, according to Zippia. Needless to say, families are struggling to afford homes. Mortgage rates in July hit 6.96%, reaching all-time highs never seen before. Sales were down 3.3% in August and 18.9% over the course of 2023. Not enough homes, high labor costs, inflation, and high-interest rates are hurting the American people.
Most people have turned to renting. Even though national rent averages are at $1,388, almost $300 more than 2019 levels, the costs of living year to year with little upfront cost outweigh the high expenses of buying a home.
According to Zillow, 4.3 million homes will have to be added to handle the demand for housing and lower prices nationwide. Developers are looking toward the south and the midwest to add homes. But the two regions only have so much to give, and developers in the northeast and west need more incentives to add housing, along with more incentives to draw consumers.
Will this housing bubble burst? Not in the foreseeable future. But if the Fed can tame inflation sooner rather than later, buying a home can become much more affordable with lower interest rates.
Author: Joshua Cheatham
