Rising home prices aren’t a sign of market strength. They’re the reason why homebuying is frozen.
Consider what my trusty spreadsheet revealed in the March homebuying report from Attom, which tracks closed transactions involving existing residences and new construction, including houses and condos, dating back to 2005. Sales stats were combined with mortgage rates from Freddie Mac and income data to see who can afford to buy.
Over the last six years, thanks to rising home prices and mortgage rates, a U.S. homebuyer’s typical mortgage check got 109% bigger. In that same period, there was only a 29% increase in American incomes.
So what would it take to close the nation’s affordability gap? 39% price cuts, 2.4% mortgages, or 62% pay hikes. Or a mix of the trio.
Then eyeball the budget-busting fallout this way.
Only 37% of American households could qualify to buy in 2025’s first quarter, according to calculations from the California Association of Realtors.
Six years earlier, this national affordability yardstick showed 57% could buy – and this qualification measure has averaged 47% since 2006.
Is the Fed to blame?
U.S. homebuying hasn’t been the same since the Federal Reserve’s war on inflation began three years ago.
The Fed’s efforts to cool an overheated economy with pricier financing began in March 2022. It totally iced home sales.
For example, March 2025’s 305,801 sales nationwide were the seventh-smallest total for the month since 2005. It’s also 15% below the month’s 20-year average.
Or take a longer-term view of homebuying’s collapse. In the 36 months since the Fed started its cost-of-living focus, 356,739 U.S. residences were sold in the average month vs. 458,937 in pandemic-twisted 2019-22.
We’re talking a 22% dive.
The price is wrong
When the pandemic upended the business climate, the Fed came to the rescue with cheap money, and home prices surged.
Then, numerous stimulus efforts and supply shortages boosted inflation to a four-decade high. The central bank ended its cheap money party, and yet home prices did not reverse.
Contemplate that the nation’s $362,000 median selling price for March was 1% short of the record $365,000 set in June 2024.
Prices have risen 5.3% over 12 months, part of a 61% jump in the last six years.
Mortgage mania
The Fed’s move to raise interest rates helped to explode what house hunters pay.
In the three years of the central bank’s inflation battle, U.S. home prices rose 11% as mortgage rates soared to 6.7% from 4.3% – creating a 47% boost to a buyer’s estimated house payments.
Contrast that to the three previous years when coronavirus-spun rates gyrated from 4.3% to a historically low 2.9% back to 4.3%. Home prices rose 44% with only a 43% payment jump.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com