When the Federal Reserve slashed interest rates at the start of the pandemic to combat a COVID-19 induced recession, millions of homebuyers seized their opportunity to lock in low mortgage rates.
The rapid increase in demand for housing, coupled with historically low supply, has spawned one of the hottest housing markets in U.S. history. Some Americans have struck gold as a result—with home prices rising 18.8% in the past 12 months alone. But rising rent and mortgage payments have also left millions wondering if they will ever be able to afford a home, or even make ends meet.
That’s especially true in high cost of living states like California.
An incredible 55% of Californians say they are worried they won’t be able to make their rent or mortgage payments this year, according to a survey from the Public Policy Institute of California (PPIC) conducted between March 6 and March 17.
The statistics are even worse for residents who earn under $40,000 a year. Around 74% of lower-income Californians said they are concerned they won’t be able to afford their rent or mortgage payments in 2022.
The rising cost of living in the golden state has many residents considering making a move. An all-time high 46% of Californians say the cost of housing in the state has made them “seriously consider” moving from where they currently live or leaving the state altogether.
California Gov. Gavin Newsom put $1.75 billion into a new “California Housing Accelerator” in late 2021 in hopes of addressing rising housing affordability. But Californians are still feeling the heat of rising housing costs. Around 89% of California residents agree that housing affordability is a problem in the state, according to the PPIC survey.
While rising mortgage rates should help to cool America’s red-hot housing market in the coming months, many industry experts are predicting home prices could rise even further before any significant decline.
In the American online real estate marketplace Zillow’s most recent forecast, analysts predicted year-over-year home price growth will hit 22% in May. And Wall Street is also predicting further increases in home prices nationwide. Bank of America predicted home prices would finish the year up 10% in a report released just two weeks ago.