Generations of consumers have embraced homeownership as part of the American dream. Lately, though, it looks more like a pipe dream.
“Housing is becoming a luxury good,” said Christopher Mayer, a Columbia University economist.
The upside? It’s a great time to rent. The spiraling costs of homeownership have turned the perennial rent-vs.-own equation on its head. In most of the nation’s largest cities, renting is now far cheaper.
The median sales price for existing homes rose more than 40% from early 2020 to mid-2022, to a seasonal peak just above $400,000, according to the National Association of Realtors.
Prices are still rising: The median sale price for an existing home was 4.4% higher in December 2023 than in December 2022.
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Mortgage rates, meanwhile, are twice as high now as in early 2022: 6.8%, as of mid-February, compared to just over 3% at the start of 2022.
Taken together, those two trends yield frightening math.
Rising mortgage rates should have pushed home prices down. They didn’t
Imagine you bought a $400,000 home, and you made a 20% down payment.
At 3.2% interest, your monthly principal and interest on a 30-year mortgage would have totaled $1,383, according to a Bankrate mortgage calculator.
At 6.8%, the same mortgage would cost you $2,086.
“It’s the least affordable housing market in recent memory,” said Daryl Fairweather, chief economist at Redfin.
Rising interest rates slowed the upward march of home prices, even leading to
