US home prices far outpace Americans' paychecks. See how bad the problem is where you live

　　Housing needs interest rates to hit at least 6% to see a recovery, expert says

　　'Mansion Global' host Katrina Campins discusses the state of the housing market on 'Making Money.'

　　Homeownership has slipped out of reach for millions of Americans due to high mortgage rates and home prices, and the affordability crisis continues to deepen.

　　Since the start of 2020, home prices have surged more than 47% – the fastest pace of growth since the financial crisis more than a decade ago.

　　Before the COVID-19 pandemic began, a house typically cost about three times a buyer's annual income. But that ratio has risen sharply over the past few years, according to a new report published by the Joint Center for Housing Studies at Harvard University.

　　Median home sales prices last year were about five times the median household income, pushing “homeownership farther out of reach for millions of potential buyers in 2024,” the report said.

　　US HOME PRICES JUST SMASHED ANOTHER RECORD HIGH AS AFFORDABILITY CRISIS DEEPENS

　　Now, in order to buy a home in nearly half of U.S. metro areas, buyers must earn more than $100,000 annually to afford a median-priced house. That marks a notable increase from 2021, when that was the case in just 11% of markets.

　　There are a number of driving forces behind the affordability crisis.

　　MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU

　　Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates and expensive construction materials.

　　Higher mortgage rates over the past three years have also created a “golden handcuff” effect in the housing market. Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further and leaving few options for eager would-be buyers.

　　A home for sale in San Jose, California, US, on Wednesday, Feb. 7, 2024. (Photographer: Loren Elliott/Bloomberg via Getty Images / Getty Images)

　　Economists predict that mortgage rates will remain elevated for most of 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic, with investors predicting just one or two rate reductions this year.

　　Mortgage buyer Freddie Mac said Thursday that the average rate on a 30-year loan this week dipped slightly to 6.95%. While that is down from a peak of 7.79% in the fall, it remains sharply higher than the pandemic-era lows of just 3%.

　　Available home supply remains down a stunning 34.3% from the typical amount before the COVID-19 pandemic began in early 2020, according to a separate report published by Realtor.com.

　　Most homeowners say they are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to a Zillow survey. Currently, about 80% of mortgage holders have a rate below 5%.