Study of housing market
- 07/19/2024 – Trump says mortgage rates have quadrupled since Biden took office. Is he right? (msn.com)
Housing has become increasingly unaffordable over the last few years, with rental costs increasing, home prices hitting a record high and mortgage rates surging.
Former President Donald Trump and current President Joe Biden both say they will work to bring those costs down.
Biden has proposed various policies to help home buyers, including a $10,000 tax credit for middle-class buyers and $25,000 in down-payment assistance for first-generation buyers.
Trump has not set out a detailed policy to address housing inflation. But he spoke about the issue, one that many voters care about, during his speech at the Republican National Convention Thursday night.
“Starting on Day 1, we will drive down prices and make America affordable again. We have to make it affordable. It’s not affordable. People can’t live like this,” Trump said, according to a transcript from the New York Times.
“Under this administration, our current administration, groceries are up 57%, gasoline is up 60 and 70%, mortgage rates have quadrupled, and the fact is it doesn’t matter what they are because you can’t get the money anyway,” he continued.
“Can’t buy houses. Young people can’t get any financing to buy a house. The total household costs have increased an average of $28,000 per family under this administration,” Trump said.
His comments come at a time when many would-be buyers are shut out of a challenging housing market. Home prices have been climbing in the wake of the pandemic-era buying frenzy, when remote work and record-low mortgage rates propelled buyers to snap up properties.
Trump’s claim that home prices are unaffordable is true in many parts of the U.S., according to data from the Federal Reserve Bank of Atlanta’s Home Ownership Affordability Monitor. As of April 2024, the most recent period for which data was available, affordability fell 7.1% from a year ago, the Fed said.
For a household earning a median income of $81,144, buying a median-priced home at $376,000 with a 30-year rate of 7% would translate to a $2,250 monthly mortgage payment of just principal and interest. That amounts to roughly 43% of the household’s income, which is considered unaffordable. Housing is considered affordable when the cost amounts to no more than 30% of a household’s gross income.
Trump’s claim that mortgage rates have quadrupled under the Biden administration is not true. Rates have gone up, but not by that much.
As seen in the chart below, the 30-year mortgage rate was at 2.65% on Jan. 7, 2021, just before Biden’s inauguration. That’s the lowest rate since Freddie Mac began tracking the data in 1971.
San Jose, California, saw new listings rise nearly 50 percent in June compared to a year ago, a signal that property owners in the city are increasingly looking to sell their homes in one of the more expensive housing markets in the country.
Along with a high number of listings, the city saw pending sales—a forward-looking indicator of home purchases—jump 18 percent last month from a year ago, according to data from Redfin.
Other cities that experienced a jump in listings included Seattle at nearly 29 percent, Miami at 25 percent, and Boston at 24 percent, while Montgomery County in Pennsylvania saw a 22 percent increase.
The increase in options of homes to buy in San Jose has been accompanied by soaring prices. The median sale price of a home jumped nearly 15 percent in the year through May, to $1.5 million, according to Redfin. Despite the high costs, May saw 660 properties sold, a 19 percent rise from the same time last year.
“Most homes get multiple offers, often with waived contingencies,” Redfin’s analysis points out. “The average homes sell for about 8 [percent] above list price and go pending in around 9 days.”
Nearly 80 percent of homes sell above the listing price, according to the Redfin study.
The housing market in San Jose appears to bucking national trends, where high mortgage rates and expensive prices are keeping buyers away from purchasing a home.
Mortgage rates were up over the last week to 7.13 percent on 30-year fixed rate loan. The cost of high home loans has depressed activity in the market at a time in the summer when the housing sector is generally at its peak. Mortgage applications were down 3 percent for the week ending June 28, and were 12 lower than at the same time a year ago, according to data from lenders.
Demand has also waned. Redfin’s Homebuyer Demand Index, which tracks requests for tours and other homebuying services from the company’s agents, plunged 17 compared to the same time a year ago, though was unchanged from the prior week.
