🏠 Fixing Home Affordability: Do We Need 39% Discounts, 2.4% Mortgages, or 62% Pay Raises?
Let’s Be Honest: Buying a Home in 2025 Feels Like Trying to Buy a Mansion with Monopoly Money
Ever feel like homes are getting further out of reach, no matter how hard you work? You're not alone. A new report shows the typical mortgage payment for U.S. homebuyers has more than doubled (up 109%) over the last six years, but the average income only increased by 29%.
So, how do we close this painful gap?
According to recent data, we’d need one of the following magical solutions:
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🏷️ 39% price cuts
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💰 62% income boosts
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📉 2.4% mortgage rates (yeah, back to those golden pandemic days)
Or, a mix of all three (a dream combo we’d all swipe right on).
📚 Let’s Break Down the Terminology
To help you follow along, here’s what we mean when we say...
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Mortgage Payment: Your monthly bill to the bank when you buy a house.
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Affordability Gap: The painful difference between what homes cost and what people can afford.
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Median Home Price: The price exactly in the middle of all homes sold. Not the average — the "middle" house.
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Interest Rate: The extra percentage you pay to borrow money from the bank.
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Federal Reserve (The Fed): The folks in charge of raising or lowering interest rates to keep the economy balanced.
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Inflation: When your money buys less because prices go up, even your favorite fast food combo.
🧊 Why Home Sales Froze
Since March 2022, the Federal Reserve has been raising interest rates to fight inflation. That sounds good in theory, but for homebuyers? It's like turning up the heat on your finances.
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In March 2025, only 305,801 homes were sold in the entire country.
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That’s 15% below the average for March over the last 20 years.
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Only 37% of Americans could afford to buy a home in early 2025, compared to 57% just six years ago.
🙃 Funny thought: It’s almost like homes now come with a "Luxury Pain" surcharge.
💸 The Fed and the “Price is Wrong” Show
During the pandemic, the Fed dropped interest rates to historic lows (even under 3%). That cheap money led to a homebuying frenzy, and home prices shot up like popcorn in a microwave.
But when the Fed later raised rates to cool inflation, the home prices stayed hot. So now we’re stuck with high home prices AND high mortgage rates — a double whammy!
Here's a look at what happened:
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Median home price in March 2025: $362,000 (almost a record)
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Price change over the last year: +5.3%
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Price change since 2019: +61%
💥 Mortgage Rates = Budget Busters
In the past three years:
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Mortgage rates rose from 4.3% to 6.7%
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Home prices increased 11%
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Monthly mortgage payments jumped 47%
Compare that to the three years before, when:
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Rates dropped to as low as 2.9%
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Prices rose 44%
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Payments only increased by 43%
Yes, it’s strange to say, but in the "cheap money era," people could afford more expensive homes than now.
