75% of Homes Are Now Too Expensive for the Middle Class

The American Dream is something all Americans instinctively strive for. The path to your American Dream generally involves going through some schooling, finding a career, building a family, and saving up for a comfortable retirement, all while living in a house where you raise your children.

Unfortunately, most middle class families in America can’t afford most of the houses on the market, forcing them to put a pin in their American Dream or give up on it altogether. Is this housing dilemma a problem, or are things better than they’ve ever been, as Uncle Joe likes to make us believe?

The answer to that question is obvious, no matter how much the left tries to lie to you, your pocketbooks always tell you the brutal truth. Times are tight, and the American Dream is becoming less obtainable for those working the hardest in this country.

Meanwhile, Realtor. com says that it doesn’t expect housing affordability to improve. This was explained to be due to borrowing costs and home undersupply.

Read more: https://t.co/hcjUksLj3z

— unusual_whales (@unusual_whales) July 7, 2023

Home Sweet Home

According to the National Association of Realtors, over 75% of houses on the market are too expensive for middle class buyers. To break it down more specifically, of the 1.1 million homes on the market for April 2023, middle-income families could only afford about 23%.

Compare those numbers to five years ago when the middle class could afford 50% of all houses on the market. The Mortgage Bankers Association says that housing prices in the United States have never been as unaffordable as they are now.

So what is causing this housing deficit for the middle class? Like most things dealing with money, it’s a few complicated factors.

First, there is a housing shortage. The market is missing roughly 320,000 houses priced at or below $256,000. 

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That price is the ideal housing cost for those who earn up to $75,000 annually, or what is considered middle-income families.

Economic strategist Mitch Roschelle explains:

“Before the financial crisis, we had 14 months supply of homes, that’s over a year’s worth of homes. Now we have less than a three months supply.”

If there aren’t houses to buy, there isn’t much hope to clinch that ever more elusive American Dream. 

The rise of “supply and demand matters for housing affordability but ONLY insofar as it applies to Airbnb” has been a very funny development. pic.twitter.com/pdw0gfV9Li

— Matthew Yglesias (@mattyglesias) June 30, 2023

The rate game

The second factor in the decline in affordable houses for the middle class is the interest rate increases. The average 30-year fixed mortgage rate surpassed 7% in May, reaching a two-decade high.

These mortgage rates are only expected to pull back to 6% by the end of the year. According to the Case-Shiller U.S. National Home Price Index, as of Q1 2023 there was an annual appreciation of 7.9%.

Compare that to the Bureau of Labor Statistics wage growth numbers that hovered at 3.2%, and we have quite the inconvenient imbalance. Wage growth’s inability to keep up with the increase in housing rates has caused an affordability gap for the middle class that Joe Biden claims to care about.

81 million votes… but Biden couldn’t fill a couple dozen seats at his “Bidenomics” rally yesterday. pic.twitter.com/0cZM5SXYxh

— Tim Young (@TimRunsHisMouth) July 7, 2023

Founder of RAD Diversified REIT Dutch Mendenhall further explains that:

“…fewer people want to sell as they fear they would not be able to afford the same or better-level home for their next purchase, which has prevented many potential sellers from putting their homes on the market.”

And thus, the vicious cycle feeds into itself. Homeowners are gun shy to sell, and buyers have less to choose from than they can afford. 

Goodbye American Dream, Hello American Disappointment.

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But I thought things were better?

President Biden has hung much of his hopes for reelection on the idea that the middle class will vote him in for a second term. Rolling out his cleverly dubbed “Bidenomics,” he claims to care deeply for the middle class, understanding what it’s like to be us and knowing what needs to be done to improve our current financial situation.

A financial situation he also likes to claim is better than it’s ever been, thanks to him. President Biden sold his Bidenomics in Chicago recently with the following:

“Bidenomics is about building an economy from the middle out and the bottom up, not the top down.”

As the mother of five girls, i can tell you from personal experience that it’s gotten incredibly expensive to raise a family.

Bidenomics are not working. pic.twitter.com/9tTgv7pTHb

— Mercedes Schlapp (@mercedesschlapp) July 7, 2023

How has that been working out for us? Since President Biden has taken over, the middle class has paid more for everything from food to homes, cars to energy, and perhaps the most impactful – loans.

Numbers calculated from mid-2022 showed that middle-class households were spending $8,000 more than in 2019, and they were spending more on mandatory costs such as housing, transportation, and food. How has the middle class been shouldering these increases in prices?

By swiping their credit cards. The United States credit card balance is about $1 trillion, with interest rates soaring above 20%. 

The typical American household carries roughly $10,000 in credit card debt monthly. Since getting a home loan requires a debt-to-income ratio of about 35%, the ability for middle-income families to find their way into their dream homes is slipping away.

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An uneasy future

I recently became a first-time home buyer at the age of 40. Personally, I always preferred to rent.

Being in the military for 20 years and moving every two years or so made me comfortable with a nomadic lifestyle. I also enjoyed having a landlord responsible for all my maintenance.

However, my family dynamic changed drastically this year. My parents had to move in with my husband and me, making us a part of what is dubbed “The Sandwich Generation.”

The Biden economy is so ‘good’ that my dad, like many other Boomers, was laid off from his job a year before retirement age. As if cosmic karma didn’t have enough to do shortly after, he was diagnosed with Parkinson’s Disease, and just like that, my family of four turned into a family of six.

Our three bedroom, two-and-a half-bath townhome in northern Virginia wouldn’t cut it anymore. We are lucky.

My husband and I have pensions from our military service and disability we earned fighting the last Forever War.  But the cost of everything has gone up thanks to inflation and thanks to my growing family – and to say that I sleep easy would be a lie.

Like most Americans my age, I nervously check our bank statements and weigh every penny we spend because our family’s and the economy’s future can change on a dime. A dime we might not have when that future comes.

Bidenomics has improved my physical strength and stamina immensely.

I can now carry $500 worth of groceries with one arm.

— Joey Mannarino (@JoeyMannarinoUS) July 7, 2023

If you are fortunate enough to have a roof over your head and a piece of the American Dream, count your blessings; many just like you can’t say the same. And while counting those blessings, you should count your cash while at it.