The long-held American Dream of owning a home has become more burden than blessing in the current economy. A new Wall Street Journal report finds total homeownership affordability has fallen to its lowest level since the mid 1980s, thanks to the combination of high home prices, high interest rates, and surging home insurance costs.
Record high prices and historically high interest rates are a tough enough combo, but that is only the beginning for those looking to buy a home. "Getting into the house isn't the only cost," says Bill Dendy, financial planner with Raymond James. "I mean, once you get there you want to furnish these houses and be able to do other things with the yard and such...it's all very expensive."
Indeed, home improvement costs have risen by more than 8% in the past year, while home insurance costs are up some 20% since 2021, according to sites that track those numbers. All of it is a perfect storm for those looking to buy, and for many who already own a home. "For a lot of people who were already living with every dollar spoken for, many are now turning to their savings or to credit card debt," says Dendy. "These are all caution lights for our economy going off at the same time."
With the cost of renting now cheaper than owning a home in most of the country, many younger and middle class Americans simply won't be entering the housing market. "Economists are saying this is going to change our economic cycles in some ways, if we make it impossible for that first home to be purchased by folks who are 20-to-30 years old," says Dendy.
With persistent high inflation keeping interest rates elevated, Dendy warns there is no sign this trend will reverse anytime soon. "If you take away the consumer from consuming, and reduce new homeownership and all the consumption that goes on there, that can have a domino effect on the overall economy," he tells KTRH. "This cannot continue long-term and be healthy for us."
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