Economist Mohamed El-Erian warned that U.S. housing affordability remains under severe pressure after sharing data showing homebuyers now spend roughly 42% of their income on housing costs.
Citing the Burns Affordability Index referenced by The Wall Street Journal, El-Erian said the figure remains "extremely unaffordable," even though it has improved from a 48% peak reached in late 2023.
The index measures housing costs using a median-priced existing home with a 10% down payment.
Buyer Pressure
Affordability concerns continue weighing on the broader housing market as mortgage rates remain above 6% and home prices stay elevated. The average U.S. 30-year fixed mortgage rate recently climbed to roughly 6.36%, increasing pressure on buyers already struggling with borrowing costs and limited affordability.
Zillow Group Inc. (NASDAQ:Z) CEO Jeremy Wacksman recently said affordability remains one of the biggest challenges for the housing market, adding that transaction volumes are seeing only "very modest gains" as economic uncertainty keeps buyers on the sidelines.
Regional data also shows that affordability pressures remain severe in several states. A WalletHub analysis found homeowners in Hawaii spend roughly 50% of household income on housing costs, while California homeowners spend about 43%.
Market Strain
The affordability crunch is also affecting consumer behavior and housing-related businesses. The Home Depot Inc. (NYSE:HD) recently warned that consumers are delaying larger renovation projects due to housing affordability pressure, weak consumer confidence and a sluggish housing market.
At the same time, rising ownership expenses continue adding strain beyond mortgage payments. A recent Clever Real Estate report found the average homeowner spends nearly $24,000 annually on housing expenses outside mortgage payments, rising to roughly $28,000 when HOA fees are included.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.
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