It is virtually impossible for first-time buyers to purchase a home amid soaring house prices and mortgage rates, according to an analyst.
In an X post on Sunday, Moody's Analytics chief economist Mark Zandi said first-time buyers may not even be able to purchase a house in the market after home prices increased by 5% in 2023 and 50% over the past four years.
Data from the St. Louis Fed showed that the median US home sale price rose about 27% from the first half of 2020, when prices were below $330,000, and the last three months of 2023, when prices were $418,000.
"Not only did the economy avoid recession in 2023, as widely feared, the economy had a stellar year. The latest evidence is the just released Moody's repeat sales house price index for December. Prices are up 5% from a year ago and almost 50% since just prior to the pandemic," Zandi wrote on X.
"For the two-thirds of Americans who own their home, the higher prices mean a massive increase in their wealth. But of course, this is a massive problem for potential first time homebuyers. Given the collapse in affordability, buying a home is not even remotely possible," he continued.
Not only did the economy avoid recession in 2023, as widely feared, the economy had a stellar year. The latest evidence is the just released Moody’s repeat sales house price index for December. Prices are up 5% from a year ago and almost 50% since just prior to the pandemic. pic.twitter.com/DYiQZyk762
— Mark Zandi (@Markzandi) January 28, 2024
For the two-thirds of Americans who own their home, the higher prices mean a massive increase in their wealth. But of course, this is a massive problem for potential first time homebuyers. Given the collapse in affordability, buying a home is not even remotely possible.
— Mark Zandi (@Markzandi) January 28, 2024
What Other Experts Say About Homeownership
Mark Zandi's outlook is also echoed by Ali Wolf, chief economist of building consultancy Zonda, who said homebuying is out of reach for many Americans, particularly the middle class.
"In the past, if you were middle class, it was almost assumed you would become a homeowner," Wolf told Realtor.com in a report published last week. "Today, the aspiration is still there, but it is a lot more difficult. You have to be wealthy or lucky."
Yelena Maleyev, a senior economist at KPMG, also spoke with Realtor.com and said the typical American family would need lower mortgage rates and home prices to be able to afford a home.
"The typical family in today's market cannot afford the typical home," Maleyev said. "It will take a combination of lower mortgage rates and lower home prices and more supply to help the typical family afford the typical home."
Despite soaring home prices, the median household income only increased to $74,580 in 2022, the outlet noted, citing data from the U.S. Census Bureau. For context, middle-class Americans made, on average, about $60,000 in 1970.
