At Heritage.org, economist Stephen Moore explains how Joe Biden is making homeownership more difficult for Americans. He writes:
In boasting about “Bidenomics” two weeks ago in Milwaukee, President Joe Biden declared that his policies are “restoring the American dream.” Then he went into his creepy whispering mode and assured us “it’s working.”
Isn’t a big aspiration of the American dream owning a home? Biden keeps making first-time homeownership harder for young families for two reasons. One is that the overall jump in inflation and the slower increase in wages and salaries means that homes are more expensive. High home prices benefit those who already own their homes, but much of the increased value is due to general inflation, which reached a high of 9% last year and hurts everyone.
A bigger killer for first-time homebuyers has been the steady rise in mortgage rates under Biden. When he came into office, the mortgage rate was 2.9% nationally. Now it is 7.1%, thanks in no small part to the Federal Reserve’s 11 interest rate increases prompted by the $6 trillion Biden spending and borrowing spree in 2021 and 2022.
So now, according to the mortgage company Redfin, just the increase in interest rates on a 30-year mortgage from 5% to 7% means that a middle-income family that could once afford a median-value home of $500,000 can only afford a home worth $429,000.
Great, spend more and you get less house. Or instead of a single-family home, you can only afford a three-room condo or a townhouse. If we compare the rates today versus when Donald Trump was president, the typical homebuyer can only afford a house with a price tag more than $100,000 less than three years ago.
What a deal? Maybe this is one reason the size of a new home is smaller than in the past.
Here’s another way to think about the damage done by Biden policies: If you want to buy a $500,000 home today, which is close to the median price in many desirable locations, your total interest payments will be at least $800 more per month. That means over three decades of payments totaling at least $250,000.
Of course, rents are up nearly 20% as well, so for many 20-somethings, this means sleeping in the parents’ basement.
Biden talks a lot about bridging gaps between rich and poor and blacks and whites. But the group that is most handicapped by these interest rate shocks is minorities. Black homeownership is still less than 50% for black households. The Washington Post calls this “heartbreaking,” but they blame racism, not bad government policies.
There’s one other impediment to homeownership for Generation X and millennials. Many 30- and 40-somethings are hamstrung by their existing and expanding debt. Credit card debt is now $1.03 trillion. Half of all families are expected to have problems paying off this debt each month. Delinquencies are rising, which can mean penalty rates of 20% to 25%.
So, if families can’t afford their existing debt, how will they get a bank to approve a $400,000 or more mortgage loan?
An even bigger question is how in the world can Biden call his economic policies a success?
Read more here.