United States: Heavy Housing Costs Constrain Household Income and Expenditure

■ Housing affordability has deteriorated again due to rising home prices and interest rates.  
■ Housing expenses, including related costs, now account for more than 40% of household income, significantly constraining household finances. 
 
Amid rising prices, alleviating the cost of living for residents has become a key point of contention in the US midterm elections this November. Housing affordability has worsened again due to escalating cost-push inflation and rising interest rates. The Housing Affordability Index (HAI), a representative indicator of housing affordability, although it improved in the second half of last year, has declined for five consecutive months as of June. Component data shows that rising median home prices and 30-year fixed mortgage rates have offset the growth in median household income.  
 
   The latest HAI value (June: 102.3) remains above the benchmark of 100, meaning that a standard household can still keep mortgage payments within 25% of their income when paying a 20% down payment and applying for a 30-year fixed mortgage to purchase a median-priced home. However, if we use the Atlanta Fed's Home Ownership Affordability Monitor (HOAM) standard, setting the down payment at 10% and including property taxes, insurance, and other related costs, the latest April data shows that housing costs have reached 43% of household income, consistently exceeding the 30% warning line since April 2021, reflecting a significantly heavy housing burden after including related costs. 
 
Despite economic expansion and continued household income growth, the living pressure on middle-income families remains difficult to alleviate, largely due to persistently high housing expenditures. Housing costs, including related expenses, account for over 40% of household income, significantly constraining household finances and potentially leading to a decline in savings rates and weakening consumer confidence. This month, the US passed the bipartisan 21st Century ROAD to Housing Act, which includes measures to expand housing supply, strengthen support for low-income families buying and renting homes, and relax construction regulations. However, in the current environment, interest rates and housing prices are unlikely to decline significantly in the short term, and improvements in housing affordability are expected to remain limited.