How the Radical Left Destroyed the Real Estate Market

Housing affordability has hit a 17-year low, meaning the dream of owning your own home remains out of reach for the average person. With the cost of living crisis, saving enough for a down payment and then making a monthly mortgage payment has become a Sisyphean task — and radical leftist policies are to blame.

Adding up the monthly cost of capital and interest on a mortgage, property taxes, and insurance adds up to half of the average net monthly worker’s pay. That would be a stretch even in good economic times, but it’s downright impossible when the prices of basic necessities like food and energy have risen by more than 20% and 50%, respectively, in less than four years.

When people take out credit card loans just to pay for groceries, spending half of their income on housing simply becomes impossible.

Worse still, the cost of owning a home in about a third of the country is more than 60% of the average worker’s net salary, more than twice the recommended guideline.

But the problem is widespread: In 98.8% of counties across the country, home prices are lower than their historical averages.

Today’s stratospheric home ownership costs and frozen housing market are the result of a fatal combination of record-high home prices and rising interest rates. Both factors are the result of a radical leftist, big government agenda.

Forty years of high inflation was created by a spendthrift Congress and White House that spent trillions of dollars the country didn’t have. In 2020, the year before the radical left took control of the federal government, prices rose just 1.4%. Just 18 months later, prices rose almost that much in a single month.

Just as inflation was the predictable result of excessive government spending, so too was rising interest rates. The massive multi-trillion dollar deficits of the past few years have caused prices and interest rates to rise significantly.

That means not only will you have to borrow more when buying a home, but you’ll also pay more in interest on the loan. As a result, the monthly mortgage payment on the average-priced home is twice as high as it was in January 2021.

Normally, high sales prices encourage homebuilders to build more homes and increase profits. However, inflation has driven up the cost of building a home to record highs, which has squeezed homebuilders’ profit margins. That means fewer new homes are coming to market.

At the same time, many current homeowners have a huge incentive not to sell: They can’t afford to lose the ultra-low interest rate. Millions of people took out mortgages or refinanced at around 2% or 3% in 2020 and 2021. Selling a home today means losing that interest rate in exchange for a rate of 7% or 8%.

Because it is prohibitively expensive in many cases, sometimes doubling the monthly mortgage payment, homeowners are trapped in the golden handcuffs of yesterday’s low interest rates. This means fewer existing homes are coming to market, in addition to a shortage of new homes.

The situation is so bad that home sales have fallen to their lowest levels in the 21st century, even below the numbers seen during government lockdowns in 2020, when the mere act of buying a home was illegal in many states.

Today’s housing market would be painful enough if it happened in a vacuum, but the policies of the radical left have made virtually every aspect of life more expensive, not just homeownership. This has created a divide between those lucky enough to buy a home before the radical left implemented its agenda and the rest of America, who seem doomed to rent forever.

The only way to change this grim fate is to reverse the public policies that got us here. Before the dream of homeownership can be restored, the big government nightmare must end.

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EJ Antoni is an economist specializing in public finance, a Richard F. Aster Fellow at the Heritage Foundation, and a senior research fellow at Unleash Prosperity.