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Special Report

Housing Market Research Brief

July 2022

Living Cost Sensitivity and Slower
Household Creation Modify Demand Flows

Sequence of rate hikes decay housing affordability. In late July, the Federal Reserve again lifted the overnight rate by 75 basis points to a target range of 2.25 to 2.50 percent. This will likely apply additional upward pressure to mortgage rates, with the 30-year fixed-rate already climbing more than 200 basis points this year to 5.3 percent at the end of July. Higher borrowing costs amid towering home prices make ownership difficult for a growing share of the population. As of June, the estimated affordability gap, or the difference between a monthly payment on a median priced home and a rent obligation, in the U.S. surpassed $1,000. That margin was about half as large just 12 months earlier, demonstrating how the relative affordability of apartments is improving, despite robust rent growth. For some markets, however, higher home and rent costs amid inflation is slowing demand.

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