Housing affordability has reached an all-time low in the U.S., according to data from the National Association of Realtors (NAR).

The NAR’s latest Quarterly Housing Affordability Index shows that affordability plummeted to 92.7 in the second quarter of the year, down from 101.8 in Q1 and 169.9 as recently as 2020.

A score of 100 indicates that a household with the median U.S. income has 100% of the funds necessary to qualify for a mortgage on a median-price house. Anything below that, and most households can’t really afford to buy a home.

The situation is even worse for first-time buyers, with NAR’s index showing that affordability for this group has slumped to 61.4, down from 67.4 in Q1 2023 and from 111.9 in 2020.

In other words, first-time buyers with a median income today have roughly 61% of the income to qualify for a mortgage (assuming a 20% down payment).

High interest rates and stagnant or falling real incomes are the main causes of this drop in affordability. If these indicators worsen, Americans will have a lot more to worry about than mass foreclosures.

Housing is not only the bedrock of the economy; it has knock-on effects that could reach all the way up to the Oval Office.

Big cities hit the hardest

The situation may look even grimmer depending on where in America you live, with some metropolitan areas scoring much lower on the affordability index than others.

In the New York-Jersey City-White Plains (NY-NJ) area, for example, affordability has declined from 121.1 in 2019 to 72.4 in 2022, the last available year with complete data.

In Salt Lake City, the same measure plummeted from 134.5 to 82.5 over the same period, while in Boston-Cambridge-Newton it has fallen from 123.9 to 87.6.

These are only a few examples of the unaffordability of homes in populous American urban areas, with every metropolitan area witnessing declines in affordability since 2019.

The cost of mortgages isn’t only a problem for anyone who’s ever dreamed of owning their own slice of America, since it also has serious consequences for the wider U.S. economy.

Living costs, which include mortgages and rents, tend to impact consumer spending, with surveys this year showing that as many as 92% of Americans have cut back on their spending due to rising prices.

That Americans have less money to spend because of housing unaffordability is also indicated by the rising rate of foreclosures, which rose by 7% in August compared to the previous month.

The problem with declining spending is that it has knock-on effects on businesses, which experience lower revenues and profits as a result.

In turn, a decline in their revenues and profits may ultimately hurt U.S. stocks, which, by extension, can affect investment portfolios and pensions, creating a vicious circle.

Investment strategists are warning of a “meaningful earnings recession” for stocks. According to Morgan Stanley, the earnings of S&P 500 companies are expected to fall 16% this year.

Affordability gets political ahead of election year

Frustration in the housing market could make its way to the White House as more disgruntled voters seek solutions to the affordability crisis.

President Joe Biden has launched several attempts at mitigating the current crisis, with his administration introducing a Housing Supply Action Plan in 2022 and also including measures to help households in his latest budget.

Yet the NAR’s data makes it clear that such measures haven’t had much effect. According to CBS, Biden’s approval rating has declined due to a “lack of home affordability,” among other factors related to the economy.

The apparent failure of housing policy means that many Americans will continue to struggle to make ends meet, which in turn could lead to more political disaffection.

And the problem could get worse in the pivotal election year. Home prices—as high as they are—will likely rise in 2024, according to the NAR.