(Patriot.Buzz) – Underscoring the inflationary pressures exacerbated under Joe Biden’s administration, the landscape of the U.S. housing market has undergone a significant transformation for the worse, with steep inclines in prices and payments.
As The Wall Street Journal reported, the average monthly payment for new homes, which stood at $1,915 in early 2021, has surged to $3,322 by the third quarter of 2023. This escalation reflects a housing market that has become notably less affordable than ever in recent memory.
Contributing factors include soaring mortgage rates, which have surpassed 7%, and median housing prices escalating to approximately $392,000 in October.
Before Biden took office, mortgage rates remained historically low, with a record low of 2.65% for a 30-year fixed-rate mortgage on January 7, 2021, according to the Federal Reserve Bank of St. Louis. However, these rates experienced a sharp rise, reaching a peak of 7.76% on November 2 of this year and marginally declining to 7.03% as of December 7.
This increase in mortgage rates is largely a response to the Federal Reserve’s decision to raise the federal funds rate to a range between 5.25% and 5.50%, the highest in 22 years. This action was taken to address the high inflation rate, which peaked at 9.1% in June 2022. Economic analysts attribute this inflationary spike to the substantial government spending under Biden, highlighted by legislation such as the American Rescue Plan and the Inflation Reduction Act.
While rent payments have also risen, they haven’t mirrored the steep increase seen in mortgage rates, climbing from an average of $1,784 per month in early 2021 to $2,184 by the third quarter of 2023
The impact of high-interest rates is particularly pronounced in the housing sector due to the prolonged nature of mortgage loans. For example, a 5% interest rate on a 30-year mortgage for a $320,000 house can accumulate nearly $300,000 in additional costs over the loan’s lifespan. At an 8% interest rate, the extra cost escalates to over $525,000.
The shelter sector has also been hit hard, with costs rising 17.5% since January 2021. This increase is even more pronounced than the overall 17.1% rise in costs, reflecting the significant burden on American households.
