Housing costs are rising fastest in — Montana, Utah, and South Carolina? That must be some kind of joke, right? Sorry, there is no punchline. Only American families, getting punched in the gut.
The economy is doing so well, why are Americans so pessimistic? I keep reading variations of this story over and over — I’m looking at you Paul Krugman — and it makes me feel like every day must be April Fool’s Day. Only someone who is two-thirds of the way through paying for their mortgage can conclude so cavalierly that the U.S. economy is peachy, now that the price of eggs has dropped. Because most people looking for a home nowadays can’t get one, and if I read Maslow correctly, the price of eggs really doesn’t matter much when you can’t get a home.
I’ve been writing about housing cost insanity for more than a decade now, much of it as part of my Restless Project series, so this isn’t a political rant. A pox on both your houses, I’d say, for doing essentially nothing to address this very fundamental problem. But I saw data today from Bankrate which shows things are even worse than I imagined, and I have been imagining the worst.
The headline you might have seen from this report is that would-be homebuyers now need a six-figure salary to afford a median-priced home in 22 states and DC, thanks to a combination of rising prices and high interest rates. That’s bad of course, but not so new. In 2013, I wrote a piece with the headline “For 40 million Americans, $100k income needed to buy an average home.”
Here’s what new: There is no longer an escape hatch in the housing crisis. Back in 2013, I wrote numerous stories about pockets of affordability around the country — in places like Minnesota, or Montana, or Tennessee, or Pennslyvania. At least people who were willing to take risks, leave family, and strike out to the frontier had a chance. Well, forget that. By far, the most depressing and telling information in Bankrate’s story is this: “The five states where the annual income needed to afford a typical home has increased the most since the beginning of 2020 include Montana (+77.7%), Utah (+70.3%), Tennessee (+70.1%), South Carolina (+67.3%), and Arizona (+65.3%).”
I know numbers can fly by so quickly they are hard to digest. So I’ll try it another way. Want to buy a median-priced home in Montana now? You need to earn $131,000 as a family – up 77 percent since the pandemic, from $77,000. That’s because the median home price was $507,100 in January 2024, compared to $299,300 in January 2020. That’s crushing. Montana might as well be Manhattan.
One can quibble with the calculations, which are based on a maximum of 28% monthly income paid towards housing costs and a traditional 20% downpayment. As many young homebuyers know, those old guideposts are quite passe. Plenty of buyers are putting 40 or even 50 percent of their paychecks towards their mortgage and property taxes. This kind of risk-taking leads to its own problems, naturally, including a population living constantly in “precarity.”
And that’s why economic pessimism is hardly an April Fool’s joke. But the lack of understanding and empathy about this crisis certainly is. Even those who are “benefitting” from rising home equity don’t necessarily feel good about it. Older families are trapped in high-priced homes they can’t really sell because their options for moving are limited. Sure, if you move from San Francisco to North Carolina, you might do well. But otherwise, limited supply means the market is stuck in a game of freeze tag.
The only real solution? A gigantic, nationwide effort to bolster housing supply. I’ve written this before: to simply keep pace with population growth and historic building trends, millions of new homes would have to fall out the sky tomorrow. Perhaps 7 million. Instead, the Biden administration has proposed middling solutions that fall far, far short. And if you’re waiting for a future Trump administration to propose a dramatic fix, well, I am waiting too.
This is a generation-long problem in the making, and it will take a grand solution which will take a generation to implement. We’d better start soon then. Because Americans are going to feel pessimistic about the economy until they have some hope they might be able to have a home of their own some day. To think otherwise would be foolish.
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