I’ve paid over $350,000 of rent in my life. That averages out to $2,500 a month since mid 2012. And, with near record interest rates and elevated home prices, I may end up paying another $350,000 in rent before I ever buy a house.
I am a part of what you might call the Forever Renter class. This is a cohort of people in their mid-20s to late-30s who are either unwilling or unable to buy a home under current market conditions. Unfortunately, those conditions aren’t moving in the right direction either. As Redfin recently reported, “The median U.S. home-sale price hit a record $383,725 during the four weeks ending April 21, up 5.2% from a year earlier.”
But it’s not just the median U.S. home that is setting records. Homes in many high cost of living areas are near their highs as well. Last month Zillow reported that there are now a record 550 “Million-Dollar” cities in the United States. These are cities where the typical home price is greater than $1 million. While nearly half of these Million-Dollar cities are in California, the New York metropolitan area has the most with 106:
But rising home prices are just one factor impacting affordability. High interest rates are another.
The 30-Year mortgage rate peaked last October at 7.8% before dropping through year end. At the time, the worst of it seemed to be over. However, with inflation coming in hotter than expected this year, many believe that the Fed will no longer cut rates as planned in 2024. As a result, mortgage rates have started creeping up yet again with the 30-Year near 7.2% today:
But the final nail in the coffin for housing affordability is the slow growth in income. Incomes haven’t risen in lockstep with housing prices
