The dream of homeownership has all but vanished for millions of Americans as mortgage rates continue to surge to levels not seen in over two decades.

The average 30-year mortgage rate rose to 7.23% in the week ending Aug. 24, according to Freddie Mac. That’s the highest level since June 2001, when average rates were 7.24%.

Financing over a 15-year term isn’t much better. The average 15-year mortgage rate has shot up to 6.55%, the highest since March 2002.

Mortgage rates are a crucial factor in whether people can afford to buy a home. Coupled with record home prices, they have made homeownership virtually impossible for first-time buyers.

Sky-high mortgage rates are only part of the problem

Mortgage rates are one side of the home affordability equation. The other side is how much the house actually costs.

The average median sale price of a U.S. home peaked at $479,500 in Q4 of last year—a gain of 52% over five years—according to the St. Louis Fed.

Median home values have moderated over the past three quarters, but they’re still up 32% over a five-year span. That’s roughly $100,000 in actual dollars.

Home values in the country’s largest cities are still rising. In fact, they’re barely off their all-time peaks.

The S&P Case-Shiller National Home Price Index, which measures home values in the largest 20 U.S. cities, rose by 0.7% in June. The index is just 0.02% off its peak exactly one year earlier.

June marked the fifth consecutive month that nationwide house prices were up. Every major city tracked by Case-Shiller registered gains.

It’s never been more expensive to live in a major U.S. city. The trend suggests it’s going to get worse before it gets better.

It’s not just New York and Miami reporting large price gains. Places like Cleveland, Phoenix, Charlotte, and Atlanta are growing above the national average.

Wages aren’t keeping up

Rising house prices wouldn’t be as big of a problem if wages were growing at a comparable clip. But average wage growth has barely kept up with inflation.

Wage stagnation has been a major problem since at least the 1970s. Americans today produce more stuff and are more highly educated, but their average hourly earnings have barely grown in real terms.

In economics, something grows in “real terms” if it outpaces inflation. If hourly wages rise 2%, but inflation is 3%, then earnings have declined in real terms.

The Fed has complained about a strong labor market driving wages through the roof and causing inflation. But have workers really benefited?

Even during the pandemic, when average hourly earnings rose much faster than years prior, inflation was higher.

One of the biggest reasons homeownership is so out of reach today is the ratio of income to housing costs.

According to the Census Bureau, the median household income in the United States is around $71,000. That means an average single-family house costs nearly 6 times the average annual household income.

For the average American earning $1,100 a week, a single-family home is worth 7.3 times their annual income.

These ratios are much, much higher in more desirable areas. In Boston, for example, where the average home price is $922,000 and the median household income is $79,000, the ratio is around 11.7x for households.

Boston is only the 15th most expensive housing market in the country, according to Kiplinger. Affordability problems worsen when you get to New York, Seattle, San Diego, Austin, Los Angeles, and Washington, D.C.