With high prices and mortgage rates, homeowners feel ‘stuck’

When Rachel Burress moved into her mother’s house around a decade ago, it seemed like a short-term stop on the path to homeownership.

The 35-year-old hairdresser spent those years improving her credit score and saving for a down payment. But with mortgage rates hovering near 7% and home prices skyrocketing, it doesn’t feel like the mother of three will be signing on the dotted line for a place of her own anytime soon.

“I don’t even know if I’ll ever get out and own my own home,” said Burress, who lives about 20 miles outside of Fort Worth, Texas, in a town called Aledo. “It feels like we are just stuck, and it is so hard to handle.”

Burress’ experience is reflective of the millions of Americans who’ve seen their financial and personal lives hindered by elevated price tags and high borrowing costs for homes. This can help to explain the sour sentiment about the state of the national economy.

It also sheds light on an existential anxiety for many: The American dream seems to be even more out of reach these days.

The 30-year mortgage rate, a popular option for home financing in the U.S., has bounced around 7% for the past several months. It pulled back after hitting 8% for the first time since 2000 late last year. But that’s still a big jump from the sub-3% levels seen in the early years of the pandemic — which prompted a flurry of sales and refinancing in the housing market.

On the other side of the equation, rising sticker prices are also adding pressure. The Case-Shiller national home price index has hit all-time highs this year. Zillow’s home value index topped $360,000 in May, a nearly 50% increase from the same month five years ago.

In turn, affordability is down sharply compared with a few years ago. An April reading on the economic feasibility of homeownership from the Atlanta Federal Reserve was more than 36% off the pandemic high registered in the summer of 2020.

Nationally, the share of income needed to own the median-priced home last came in above 43%, per the Atlanta Fed. Any percentage over 30% is considered unaffordable.

The Atlanta Fed also found that the negative effects of high rates and prices more than outweighed the benefits from growing incomes for the typical American. That underscores the strength of these detractors, given that the average hourly wage on a private payroll has climbed more than 25% between June of 2019 and 2024.