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Housing Costs at All-Time High in America
Despite the current administration’s promises to reduce housing costs, the latest data indicates that buying a home has never been more costly for Americans. This conclusion is based on data from the Case-Schiller Home Price Index, U.S. Census Bureau, and the Federal Reserve.
Currently, home prices stand at around 7.64 times the median household income. This is a significant increase compared to the previous peak in 2006 during the George W. Bush presidency, when home prices were 6.82 times the median household income.
Historical Trends
This huge rise in housing costs under the Biden administration is a significant shift from what has been observed historically. From the period between 1978 and the end of 2001, the ratio of housing prices to annual household incomes fluctuated between four and five. Although prices saw a surge in the early 2000s, they never reached the levels observed under the present administration and then significantly declined post-2006, instigating the Great Recession.
Home buying has gotten significantly more difficult due to current policies. Source: iStock
During the tenures of both Barack Obama and Donald Trump, the cost of housing was noticeably lower than it is now. Prices were typically between five to six times the mean household income. Despite periods of economic growth during their terms, prices never approached the levels seen since Biden took office.
From March 2022 onwards, the home price to median household income ratio has remained above seven consistently. This indicates that the cost of housing has been at least seven times the median income throughout most of Biden’s presidency. Moreover, recent data predicts that this could surge to eight times before his first term concludes.
Unfortunately, these figures only represent a portion of the problem. Not only have housing prices skyrocketed compared to income levels, but interest rates have also surged to counter rampant inflation, leading to mortgage rates not witnessed in over two decades. Thus, both the cost of homes and the expense of financing a home are rising simultaneously, creating a detrimental situation for consumers.
Factors Driving up Housing Costs
Several factors have resulted in this dramatic increase in housing costs. Chief among these are the current administration’s excessive spending and its aggressive stance on conventional energy resources such as oil and natural gas.
Influence of Government Spending
Under Biden, the federal government has embarked on an unparalleled spending spree. The federal outlays surpassed $20 trillion in the first three years of Biden’s tenure, an unprecedented amount in comparison to other presidents’ first three years. This considerable spending has fueled wide-ranging inflation affecting everything from food prices to insurance costs. However, housing prices have taken the brunt of this inflation.
There’s an alarming trend reflected in the Consumer Price Index – an individual or business that purchased goods and services worth $100 in January 2021 would have to shell out $119.40 for the same products today.
Impact of Energy Costs
The administration’s crusade against fossil fuels has been another key factor in pushing up housing costs. Rising energy costs lead to hikes in the expense of harvesting, manufacturing, and transporting the materials and tools required for building homes, which indirectly escalates housing prices.
The administration has repeatedly pledged to steer the US economy away from oil, natural gas, and other affordable fossil fuels. Implementing this pledge, it has severely restricted offshore oil and gas leases and has also stopped selling onshore oil and gas leases on federal lands – until being overridden by a federal court. Though the administration resumed selling leases post the court’s intervention, it simultaneously ramped up fees while reducing the acreage available for drilling.
These actions, combined with many others, have signaled to the fossil fuel industry that the administration is determined to bring an end to most forms of traditional energy development.
Final Thoughts
High housing prices combined with soaring mortgage rates and little anticipation of improvements shortly make up the current situation brought about by Biden’s radical economic policies. The numerous changes the current administration has made, particularly in its stance against fossil fuels, have resulted in energy costs soaring more than they were during Trump’s time in office.
For instance, in January 2021 when Biden took office, gasoline prices averaged $2.32 per gallon. Last month, that average was $3.73, and it hasn’t dropped below $3.00 since April 2021. Electricity prices have also hit record highs under Biden, with consumers and businesses paying nearly 28% more opposed to when he took office.
All these factors have contributed to higher costs for homebuilders and subsequently increased home prices, sealing a challenging phase for potential homebuyers in the US. Despite these hardships, one can hold onto the hope that necessary policy changes can be implemented to alleviate the situation.
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