High housing costs are pricing out the average American, study finds
Renters and homebuyers can’t keep up with rising housing costs, according to a Harvard University study
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High housing costs coupled with high interest rates are pricing the average American out of the housing market, causing the lowest level of home sales in 30 years, according to a new study from Harvard University.
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The State of the Nation’s Housing 2025, a new study from Harvard's Joint Center for Housing Studies, paints a bleak picture of the U.S. housing market, highlighting the growing gap between what the average American can afford and rising housing costs, plus outside factors impacting the market such as climate disasters.
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Last year, the number of new homeowners climbed by 613,000, the lowest annual increase since 2016. This largely has to do with the fact that homebuyers generally are getting priced out of the market.
Early 2025 data shows that prices have increased by 60% compared to 2019. In 2024, the average cost of a home reached a historic high of $412,500, which is five times the median household income. In areas like southern Florida, the greater New York City area, southern California, and the greater Washington, D.C. area, buyers need to earn more than $150,000 per year to afford the average home cost in their respective areas. The study also found that increased costs for premiums and property taxes are adding to owners' financial stress.
Increased rent prices, the study says, are leaving half of all renters “cost burdened,” which refers to households that are paying more than 30% of their income on housing. More than 50% of households in cities throughout California, Florida, Arizona, and more are cost burdened, according to 2023 data. Plus, 27% of renters are considered “severely” cost burdened and spend more than half of their income on housing and utilities.
The study found that high housing costs have led to a rise in homelessness as well. As of 2024, states such as California, Florida, New York, and Washington had more than 10,000 people experiencing homelessness. California has about 73,000 more people experiencing homelessness in 2024 than it did in 2014.