Housing Affordability Hits Record Low as Costs Surge

The housing affordability crisis in the U.S. has reached its worst level in recent history, driven by steep increases in home prices and mortgage rates that far outpace income growth, according to a recent report by JPMorgan.

In a housing report released on June 17, JPMorgan revealed that the percentage of income required by typical first-time homebuyers aged 25 to 44 to afford a home jumped by approximately 45% from 2019 to 2024. In 2019, homebuyers typically allocated 40% of their monthly income toward mortgage payments. By 2024, that number surged to 58% for an equivalent home purchase.

That figure is nearly double the commonly recommended housing expense ratio of 30% and suggests that buyers must slash other expenses, such as discretionary spending, to maintain a balanced household budget.

For example, in 2019, the median monthly income for this group was $4,130, and the monthly mortgage payment was $1,652, amounting to 40% of income. By 2024, income had risen to $5,833—a 41% increase—but mortgage payments soared to $3,351, more than double the earlier figure and a 102.9% jump.

“From 2019 to 2024, home prices and interest rates have increased significantly faster than household incomes, pushing affordability to historic lows,” the report noted.

Experts emphasized that affordability is not just strained by mortgage principal and interest. Rising home prices also increase the burden of down payments, property taxes, insurance premiums, and closing costs—adding to the challenges faced by buyers.

Danielle Hale, chief economist at Realtor.com, commented, “While affordability has long been a concern for buyers, the current market environment has made it significantly worse.”

Renters Face Mounting Pressure, Too

The situation is not much better for renters. A separate JPMorgan report released the same day showed that from August 2021 to July 2023, average rent nationwide rose by 6.6% annually. This matches data from the Bureau of Labor Statistics, which recorded a 6.1% annual increase in rents during the same period.

The report warned that inflation during those years forced many renters to spend over 50% of their income on housing, pushing them into “severe rent burden” territory. As a result, many households reduced spending on essentials like food and clothing by 1–2% to cope with rising rent.

However, this trend may pose broader economic risks. “Sharp rent increases immediately and persistently reduce the disposable income of low-income households, which could negatively affect the economy in the long term,” the report stated.

Experts predict that housing-related financial strain is unlikely to ease soon and warn that the affordability gap may continue to widen, especially in high-cost regions.

BY HOONSIK WOO [woo.hoonsik@koreadaily.com]