I suppose this goes without saying, but the highest US mortgage rates in a year are murder for aspiring first-time homebuyers. Especially those for whom the math already didn’t work which, let’s face it, is most of them.

The MBA’s weekly update showed the average 30-year fixed rose to 6.81% over the last week, while the association’s index of purchase activity fell to the lowest since the onset of the war in Iran.

Although a sturdy labor market and robust wage growth — particularly for so-called “job changers” — helps, it’s no panacea. Yes, annual pay increases are easily outstripping home price growth, but no, that’s not going to fix the country’s housing affordability problem (and “problem” is a polite euphemism) anytime soon.

Consider the figure below, which uses Redfin’s fantastic data sets to show the evolution of the affordability math for the “typical” family hoping to buy the median-priced home in June. Affordability’s based on the widely-used 30% rule — i.e., if you’d have to spend more than 30% of your monthly income on a given house, that’s a house you probably can’t afford.

See the problem? As a share of the median income, the annual pay needed to afford the typically-priced American home in June of 2012 was 75%. So, the typical family could afford the typical home — and then some. Beginning in 2022, that was no longer the case.

In January of 2022 — i.e., just before the Fed started raising rates, further squeezing buyers already grappling with a staggering increase in home prices the Fed ironically helped stoke — more than half of all US home listings were affordable for the typical American family. Today, that share’s just 34% and that’s after rising 8ppt from the record low in 2023.

“The earnings needed to buy a house have stabilized after several years of deterioration, but that doesn’t mean homes are affordable to the average American,” Redfin Senior Economist Yingqi Xu said, in an August 5 update.

“While a common rule of thumb in housing is that you should spend no more than 30% of your income on your monthly housing payment, that isn’t realistic for everyone,” Dana Anderson, Redfin’s long-time data analyst, wrote, in the same piece.

As a reminder regular readers don’t need, the 30% threshold isn’t just some useful rule of thumb for mortgage loan officers. It’s an actual marker for predicting the onset of a homelessness spiral when it’s breached in a given region’s rental market.

As the figure above reminds you, once the share of income spent on rent reaches 32% in a given community, local politicians can expect a rapid increase in homelessness rates.

If you look around the US, there are a lot of locales where renters are compelled to spend more than 30% of their income just to keep a leased roof over their heads. As Anderson went on to write Wednesday, the same’s true of the housing market. “In the more expensive parts of the country, middle-income families would have a hard time spending just 30% of their earnings on housing,” she said.

Get your trapper hats and baking pans. We can all start a band.