If you took a snapshot of where the U.S. economy is right now, there are a lot of data points that show we’re in a pretty good spot.
The national unemployment rate is 4.2%. That number has crept up slightly since the historic lows in 2023, but you’d have to go back to the year 2001 to find another time this century that had lower unemployment. And if you exclude 1999 to 2001, you’d have to go all the way back to 1970.
Inflation has cooled down to 2.3% as of April. That’s the lowest inflation rating since 2021.
The average cost of a gallon of gas is $3.30, which is also the lowest price since 2021.
The U.S. stock market has recovered from the downswing in March and is up around 18% since early April. The trailing 12-month return for the S&P 500 is around 11%.
And yet, in almost all of my conversations about the economy, people are still dissatisfied. Of course, the possibility of tariffs being implemented over the next couple of months has people worried.
But I think more than any other issue, people’s disappointment in the current economy always seems to come back to housing. Especially among young people.
And I have to admit, the U.S. housing market is a bit of a mess right now.
Torsten Slok recently published his U.S. Housing Outlook, which contains somewhere around 120 pages of data and graphs on the current housing market. It’s an awesome resource, but the data isn’t exactly encouraging.
The median monthly mortgage payment on a new mortgage is currently $2,965. The median monthly payment has nearly doubled since the start of 2022 alone:
Monthly mortgage costs have skyrocketed due in large part to increased interest rates. The following graph shows the historical 30-year mortgage rate versus the effective rate, which is the rate people are actually paying on their mortgage:
Throughout history, the two have been close to each other. However, since 2022, we’ve seen a huge separation in the average interest rate people have on their mortgage (around 4%) compared to the rate available to new homebuyers (over 6%).
More than half of all mortgages have an interest rate below 4%. Not to mention, 40% of all U.S. homes don’t even have a mortgage.
Because most of America has a mortgage rate below 4% and a huge swath of homes don’t have any debt attached to them, people are hesitant to move. This lowers the amount of homes available for sale, which increases home prices as demand keeps increasing.
A big reason demand keeps rising is simply due to demographics. There are more 33-year-olds than any other age in America:
What this means is there are a lot of people in their prime home-buying years who want to buy homes.
So, because of limited supply and increased demand, house prices continue to go up. This has caused the median age of first-time homebuyers to shoot up from 32 in 2020 to 38 today:
The median age of all homebuyers is now 56 years old:
How about this crazy stat?
The median home buyer in 2007 was born in 1968. The median homebuyer in 2024 was also born in 1968.
Now, to be fair, demographics play a large role here. The median American age today is also nine years older than it was in 1982.
Yes, we do have a housing affordability issue. But we also have an older population.
Despite the explosion in housing costs, the national homeownership rate has increased since the mid-2010s and is only down around 3% since the early 2000s:
So, does all of this data mean it’s a terrible idea to buy a house right now? No. Whether to buy a house or not, even in this environment, all depends on your situation, budget, and needs.
House-buying isn’t a black-and-white financial decision; it’s much more of a lifestyle choice.
However, many people can’t afford to buy a house right now solely because they were born a few years too late for one of the biggest housing booms in history.
If there is a group of people who have reason to complain about the economy, it’s the first-time homebuyers.
Thanks for reading!
Jake Elm, CFP® is a financial advisor at Dentist Advisors. Jake a graduate of Utah Valley University’s nationally ranked Personal Financial Planning program. As a financial advisor at Dentist Advisors, he provides dentists with fiduciary guidance related to investments, debt, savings, taxes, and insurance. Learn more about Jake.