Buying a house is like “playing a game you can't win”

When Nathan Wilkins moved back in with his mother and sister in 2019, he hoped it would help him save money to buy a house.

But in the years since, the U.S. housing market has been transformed by rising rents, skyrocketing home prices, and dramatically increased mortgage interest rates that have made homeownership seem increasingly impossible.

The 32-year-old insurance adjuster from Utah says he and his sister are earning more than they ever have before, but paying $2,500 (£1,960) a month in rent leaves them with little left over.

“It's like we're playing a game we can't win,” he said. “The fact that the prices are so high they're squeezing us out is just sickening.”

Such discontent is spreading, fuelling discontent and adding to widespread pessimism about the U.S. economy ahead of the next U.S. election.

The median sale price of a home in the U.S. has risen nearly 30% since the end of 2019, reaching $420,000 this spring.

And that doesn't even take into account the added cost of rising interest rates. A typical 30-year fixed-rate mortgage in the U.S. has risen from about 3% in 2020 to about 7% today.

To comfortably buy a home in most parts of the U.S., homebuyers now need to earn more than $100,000 a year, well above the national median household income of about $75,000, according to research firms including Zillow and Bankrate, and monthly payments have nearly doubled in just four years.

“It brings me to tears a little bit,” said Megan Holter, who began looking to buy a home in Austin, Texas, in 2019 when banks were offering her a 30-year fixed-rate deal of about 4.75%.

She stopped searching for a property when the pandemic hit, due to rising building materials and home prices.

She and her wife finally bought a home this year, but only after braving a 6.625 percent interest rate and moving 1,200 miles north to Columbus, Ohio, a city she picked from a spreadsheet of cities with low rent.

“Financing a home has been the biggest issue we've had for five years,” said the 30-year-old, who left the public sector for the private sector to make home buying a reality.

“We moved mountains to make it possible.

“I'm just grateful that we can afford it. I know a lot of other people can't,” she added.

According to the Federal Reserve Bank of New York, just 40.1% of renters say they want to own a home in the future, the lowest percentage since banks began asking renters this question in 2014.

Even homeowners who have been protected from immediate economic shocks by long-term mortgages and have benefited from rising property values ​​told pollsters that the shifts in the market are worrying them, as property taxes and insurance rise and the costs of moving increase.

A recent Harris Poll found that more than 70% of Americans believe the market is only going to get worse.

The issue has been linked to wider concerns about rising living costs, which have risen by 20% since 2021.

It's one of the biggest challenges facing President Joe Biden, whose presidency has coincided with a transformative housing market and dismal ratings for his management of the economy in national polls.

His better performing opponent, Donald Trump, has sought to blame Biden for inflation and, while he doesn't typically point to the housing problem specifically, frequently brings up “soaring” interest rates to argue the economy is heading in the wrong direction.

“Inflation has been a political noose for Biden in recent years,” said Brian Connolly, a professor at the University of Michigan Ross School of Business who specializes in housing issues. “Housing costs are another area where people are feeling financial pressure.”

The White House has tried to address concerns about home buying difficulties head on in recent months, proposing things like rules to limit closing costs and a $10,000 tax credit for first-time homebuyers.

It marks a shift in tack after years of focusing on the economy's strength, including low unemployment, but Biden has few immediate steps he can take and it's not clear whether the effort is resonating.

Trump's support has declined especially among young voters, whose record voter turnout helped propel him to victory in 2020. This demographic is also the least likely to own a home and the most likely to see rising home prices as their top concern.

“I don't see any platform that's really caring about the concerns of first-time homebuyers and trying to ease their pain,” said Braden Dogherty, a 30-year-old Florida native who works in manufacturing and has been inspecting homes daily for three years.

Despite having a $50,000 inheritance, no debt and decent jobs, he and his wife can't find an affordable two-bedroom apartment near their parents' home in the Orlando area.

While the housing cost problem is too big to pin the blame on any one politician or party, he said the lack of solutions is contributing to growing political disillusionment, and he hasn't decided how he will vote in November's election.

“I'm sick of it,” he said. “Housing is part of it.”

The growing protests have increased pressure on the Federal Reserve to cut interest rates as a relief measure, and Fed Chairman Jerome Powell has said he is likely to cut rates at some point.

But hopes that interest rate cuts, implemented earlier this year, would improve public sentiment have been steadily fading, reflecting concerns that efforts to lower inflation, which stood at 3.4% in April and remains well above the central bank's 2% target, may be stalling.

Instead, mortgage rates have mostly been rising since January.

Mimi Sun, 29, who recently bought a three-bedroom apartment in the Boston, Massachusetts, area, said her monthly expenses are about $200 more than when she and her husband were pre-approved for a loan in March.

At the time, they didn't realize that borrowing costs could fluctuate dramatically, so they didn't lock in an interest rate. When they went back to the lender after submitting their application in April, the interest rate they were offered had increased from 6.5% to 6.9%.

She is hopeful that interest rates will fall later this year, allowing her to refinance.

“I check the rates obsessively,” she says.

Many analysts argue that it is only a matter of time before inflation slows, paving the way for interest rate cuts.

They note that private sector reports show that rent increases play a large role in U.S. inflation calculations, but they are beginning to subside after the pandemic's ferocious surge as the supply of apartments soars.

Orphée Divongie, senior economist at housing website Zillow, said rising wages, increased construction of new homes and slowing rent and home price increases are likely to ease the challenges of home buying, although not in time for the November election.

“Things are improving,” he said. “Obviously, there's still a long way to go, but we're seeing some improvement and we're going to see more improvement.”

But there is a more pessimistic view.

As rising home prices put homeownership out of reach for more people, rents could remain stronger than expected and inflation could remain elevated.

And unless mortgage rates fall significantly, sudden changes in borrowing costs could become a long-term constraint on supply as homebuilders pull back and homeowners who took out mortgages when rates were low hesitate to move.

Braden, a Florida native, doesn't think the Fed can come up with an easy solution, and worries that the central bank may have contributed to the current crisis by keeping interest rates abnormally low for a decade after the 2008 financial crisis.

“Whatever happens, whether interest rates go up, go down, stay the same, I feel like the next decade is probably going to be tough for most people,” he said.