All around the nation can be found the detritus of “Bidenomics,” especially in America’s broken housing market.
Countless families are struggling just to find somewhere affordable to live, with the American dream of homeownership all but snuffed out for much of the middle class.
Higher interest rates have drastically increased the cost to finance anything—credit card interest rates are at record highs, and mortgage rates are almost three times as high as they were three years ago.
The combination of higher home prices and higher interest rates has broken America’s housing market. Since Biden became president, the median home price has jumped over 27 percent, and interest rates have risen from 2.8 percent to 7.2 percent.
Those two factors have caused the monthly mortgage payment on a median-priced home to more than double, from $979 to $2,075.
That’s costing a family more than $13,000 extra per year for the same house. This has forced many Americans to rent instead, and the increased demand for apartments has driven rents to record highs.
Mortgage rates today are nowhere near record highs; rates hit 20 percent in the early 1980s, for example. The difference today is that the percentage of your take-home pay that must go to paying a mortgage is much higher because home prices have risen so much faster than incomes for decades.
Consequently, homeownership affordability today is at one of its lowest levels in American history.
For those lucky enough to have gotten a mortgage before interest rates jumped, they’re now wearing golden handcuffs and are trapped in their home and mortgage. If they were to sell their house and move, they’d lose their current mortgage with a low interest rate and must get a new mortgage with double the interest rate.
That’s prohibitively expensive for millions of Americans. And it’s putting a severe crimp on the supply of existing homes.
Unfortunately, the supply of new homes is also being hamstrung. Because of inflation, cost indexes for homebuilders are near all-time highs, so the sellers of new homes cannot afford to reduce their selling prices, which would help offset higher interest costs to homebuyers.
Since so few people can afford a home at today’s prices and today’s interest rates, homebuilders have been forced to scale back construction. That has reduced the supply of new homes to the market.
The drop in supply is keeping upward pressure on home prices, while the continued growth of government, via Bidenomics, is pushing interest rates skyward.
The entire destructive process can be short-circuited, however, if we just remove the first link in the chain: excessive government spending.
If Bidenomics is not reversed, don’t expect the housing market to improve. After all, one definition of insanity is doing the same thing and expecting a different result.