Study Unveils Major Shift in Home Affordability

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Do you dream of owning your own home one day? A study conducted by found there has been a major shift in the affordability of homes and apartments. The Cheat Sheet spoke with Danielle Hale, chief economist at, to learn more about the study and how it affects you. Here’s what she had to say.

The Cheat Sheet: What caused this major shift in housing affordability?

Danielle Hale: Rising home prices and rising mortgage rates are both contributing to the shift in housing affordability. These two factors combined are driving the cost of financing the typical home up at a pace that’s nearly three times the monthly cost of rent. This is shifting the balance of whether it’s more affordable to buy or rent. The rise in home prices is also linked to a shift in inventory available to buyers. Starter homes are being depleted and replaced by larger homes and higher-priced listings.

CS: Which area had the biggest change when it came to housing affordability?

DH: Over the last year, 289 counties have transitioned from being more affordable to buy, to being more affordable to rent. The transition included 20 larger counties with more than 100,000 of which seven counties in the Midwest and eight counties were in the South. The reason we saw more transitioning counties in the Midwest and the South is because these regions are the last bastions of housing affordability. They currently have more counties where buying a home is more affordable than renting a home.

CS: What are some of the major costs associated with home ownership that make it unaffordable for so many people?

DH: This analysis focuses on the simple monthly costs of buying a home with a mortgage. It includes principal and interest payments as well as estimates for property taxes and insurance costs. It does not include other one-time costs such as those associated with closing on your mortgage or moving. This analysis also does not focus on the wealth-building aspect of buying a home. Each month, you pay down your mortgage principal balance, building up the equity in your home, which adds to your wealth over time. One of the main limitations for prospective home buyers is their current existing debt, which adds to the difficulty in coming up with a large enough down payment to purchase a home.

CS: What advice would you give people who want to buy a home but can’t afford it?

DH: It’s worth asking the question: can I afford a home or not? If the monthly costs are unaffordable–which this analysis shows for the typical family in counties that contain 41% of the nation’s population–putting down a bigger down payment is one way to overcome that obstacle, so focus on saving, looking for grants, or support from family or friends. Another way that home shoppers have looked to make home buying more affordable is adjusting their dreams–by looking for a smaller home, a less expensive home, or a home in a different neighborhood.

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