Americans now need to spend as much as 43% of their income to afford a home, with mortgage rates surging to their highest levels since 2000.
The average rate on 30-year fixed mortgages jumped this week to the highest level since 2000, approaching 7.50%, according to Mortgage News Daily. The rate was only about 3.2% at the start of 2022.
Surging borrowing costs are eroding housing affordability for Americans. Mortgage rates have climbed in response to the Federal Reserve's steep interest-rate increases over the past six quarters to combat inflation. The central bank has boosted benchmark borrowing costs from near-zero levels to upward of 5% since March 2022.
"US housing affordability is worse today than the peak of the last housing bubble. The median American household would need to spend 43% of their income to afford the median priced home," Charlie Bilello, chief market strategist at Creative Planning, said in a post on X.
Higher mortgage rates have also resulted in a lack of housing supply, with homeowners turning reluctant to part ways with low rates they secured previously and holding off from selling. The drop in supply has helped push home prices higher, further reducing affordability for buyers.