Trump failed to make US housing affordable again
APO•US housing affordability remains strained, with the monthly cost of carrying and insuring a median home up 63% since early 2022. Nearly 70% of households cannot afford a $400,000 median home at a 6.5% mortgage rate and 10% downpayment, according to Apollo Global Management Chief Economist Torsten Slok.
1. Housing remains stalled
The US housing market remains depressed despite pent-up demand and a shortage of homes. Home sales in September fell to their lowest level since 2001, housing starts have collapsed, and the number of houses under construction has dropped 40% over five years.
2. Borrowing costs constrain buyers
Mortgage costs have climbed sharply, and the monthly cost of carrying and insuring a median home is up 63% since early 2022, nearly three times the increase in disposable incomes. With a 6.5% mortgage rate and 10% downpayment, nearly 70% of US households cannot afford a median home valued at $400,000, Slok calculates. The current cost of a 30-year mortgage is over 7%, while roughly three-quarters of outstanding residential mortgages carry rates below 6%, leaving many homeowners reluctant to move.
3. Three paths to affordability
The article outlines three possible routes: home prices falling more than 20%, incomes rising faster than prices, or a substantial reduction in interest rates. It says Trump’s policies of running a large fiscal deficit while waging war on Iran have pushed borrowing costs in the opposite direction, and warns that efforts to control long-term government bond yields could destabilize the dollar’s role as the global reserve currency.
