Failed public policies are undermining the institution of marriage in America. Rates of both marriage and child births have been trending down for decades, but the current cost-of-living crisis is poised to accelerate these declines. If you can’t afford a place to live, chances are you won’t get married and have kids.
That’s precisely the calculus for millions of young Americans today who can’t make ends meet despite a record number of them holding second or even third jobs. Sixty percent are living paycheck to paycheck. Americans have accumulated a record-high $1.1 trillion in credit-card debt as many can’t cover even necessities.
But Americans aren’t just falling into debt — they’re falling behind on payments too. Defaults and delinquencies are rising at the fastest pace since the Great Recession when there was a mortgage meltdown and a global financial crisis.
The financial strain on American families explains why people view current economic conditions so unfavorably in polling. Perhaps nothing illustrates this pessimism better than the housing market.
The monthly mortgage payment on a median-price home has doubled in the last three years. Unless your income has also doubled, you’re falling behind when it comes to buying a house.
The median price of a new home has shot up to a stratospheric $435,000. Even the median price of an existing home, at about $387,000, would have been inconceivable three years ago.
The typical family buying a home today will have a monthly cost of homeownership around $3,000. That’s about half the median household income — before income taxes. It’s no wonder that the Federal Reserve Bank of Atlanta’s homeownership affordability index is at a record low today.
The index even shows that the cost to own a median price home in several major metropolitan areas requires more than 100% of the median household after-tax income. In only a single metropolitan area with at least 500,000 people is the median price home affordable in America.
While homeownership is normally a great tool for building wealth, it is also often a precursor to major milestones in life, like starting a family. But with the American dream of homeownership having turned into a nightmare, nearly an entire generation of young people can’t buy a home and are delaying family formation because of it.
And this isn’t simply theory – empirical research published by Federal Reserve economists has already demonstrated that higher mortgage interest rates has a negative impact on the birth rate. That’s because those higher mortgage interest rates increase the cost of homeownership.
What caused this sad state of affairs? It was a deadly combination of impolitic public policies.
Since 2020, the federal government has been spending trillions of dollars it didn’t have, running massive deficits. The Federal Reserve covered these deficits by simply creating money for Congress to spend. That devalued the dollar, which fueled inflation as prices soared – including prices for housing.
But home prices got an extra boost from the Fed’s artificially low interest rates. What a homebuyer is really concerned about is the monthly payment on a home, not so much the home’s price. Lower interest rates allowed people to take on much larger mortgages for the same monthly payment, creating frenzied bidding wars for homes.
When interest rates finally rose to fight inflation, they pushed monthly mortgage payments through the roof, completely out of the reach of most Americans. It also trapped millions of Americans in their homes.
When a home is sold with a mortgage, the homeowner loses the loan and must get a new one, at current market rates. If someone bought a home just a few years ago, they are likely going from a 2-3% mortgage to a 7-8% one. That would cause their monthly payment to explode.
The options are to drastically downsize or not move at all — and millions have chosen the latter. That’s helped cause a severe shortage of homes for sale, the lowest level in decades. Consequently, home prices are staying high despite today’s higher interest rates.
While the failures of public policy are often measured in dollars, the unaffordability of housing today demonstrates that there can be even more far-reaching consequences: families never formed, and lives never lived.
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The views expressed in this piece are those of the author and do not necessarily represent those of The Daily Wire.