What Does It Mean to Be in an “Affordability Crisis”?

Bharat Ramamurti, former deputy director of the White House National Economic Council, said part of the problem was that most of the increased income families were bringing in was getting eaten up by inflation. “Imagine if you get a $10,000 raise but then you spend $9,500 out of your new $10,000 just paying for the same stuff you were buying before,” he said. “That’d be really frustrating, because you’re like, OK, finally, I can go on a vacation, or I could save a little bit more or whatever.” Instead, the increases went to rent or utility bills or groceries, and people saw that as the government’s fault.

Ramamurti has looked at housing, where affordability has decreased over time. But he said an even more important indicator is the rate of home sales, which has gone way down over the past year. In a normal market, families would buy houses and move as they saw new opportunities or their families grew. But they’re not doing that now, largely because still-high interest rates are locking people into the much lower rates they were able to get if they were lucky enough to buy during the boom in 2020 or 2021. The decreased sales means families are reluctant to take on new mortgages, even if they’re ready to move.

On a historical scale, interest rates are not that bad, but they are still higher than most adults trying to buy homes today remember them being. But there are other indicators showing why families might feel stretched. The Century Foundation showed that utility bills are up 32 percent since 2022. What’s worse, an increasing number of families headed into winter with past-due balances, meaning they were at risk of having their power shut off during the coldest months.