‘Stuck’: Housing market malaise may last for years

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Polls show skyrocketing housing costs are a top issue for young voters, with more than 90 percent in one survey saying affordability is a key factor in how they'll vote.

Polls show skyrocketing housing costs are a top issue for young voters, with more than 90 percent in one survey saying affordability is a key factor in how they’ll vote.07/05/2024 05:00 AM EDTThe U.S. housing market — plagued by high interest rates and sluggish sales — is poised to become a major drag on the economy heading into the election.

The year started with some optimism for the market, with Wall Street investors expecting the Federal Reserve to finally begin cutting interest rates as inflation ebbs. That hasn’t happened, so the Fed’s elevated rates continue to make it more costly to build and more difficult to finance home purchases.

“It’s unprecedented, it’s never been such an issue,” said Daryl Fairweather, chief economist at real estate brokerage Redfin, which conducted the survey of young voters. “I think this is the first time housing could actually matter in the swing states — before it was mostly in the coastal areas,” Fairweather said, noting that President Joe Biden mentioned housing costs in the first minutes of his debate with former President Donald Trump.

“It’s really hard for the housing market to get out of this funk because of the mortgage rate lock-in effect,” she said. “I don’t think that the problems with the housing market are going to clear up in a matter of years. It could take a decade.” The two programs are the latest effort by the Biden administration to address an affordability crunch driven by a shortage in housing following years of below-average construction in the wake of the global financial crisis. Home prices in the 20 largest metro areas in the U.S. reached a record high in April, according to the latest data from the Case-Shiller home price index.

 

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