The Macro Brief: How Slowing Pay and Politics Collide in the Housing Crunch

The Index in Context

The Housing Affordability Index (HAI) measures whether a median-income family can qualify for a 30-year fixed-rate mortgage on a median-priced home with a 20% down payment.

• 100 = just enough income to qualify.
• Below 100 = not enough — May 2025’s reading near 94 means the median household is ~7% short of qualifying.

🏠 Housing Affordability Index is at 94. If 100 = just enough income to buy the average home, we’re 6% short. Rates steady, but homes are still out of reach.

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The 2024–2025 Rollercoaster

In summer 2024, affordability jumped from ~91 to just above 105 as mortgage rates dipped slightly and home price growth slowed. It hovered near 100 into early 2025, then fell sharply this spring to ~93.

📉 After a brief summer rebound, housing affordability has crashed back to last year’s lows. The break is over — the squeeze is back.

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Why the Drop if Rates Haven’t Gone Up?

Mortgage rates are holding steady. The drop came from:

• Higher home prices in competitive spring markets.
• Slower wage growth that didn’t keep up with costs.
• Rising taxes & insurance eating into budgets.
• Tight supply keeping prices elevated.

💰 Rates didn’t rise — prices did. Add slower pay raises, higher taxes & insurance, and affordability fell off a cliff.

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The Wage Growth Problem

Median hourly wage growth slowed from 6.5% in April 2024 to 3.9% in May 2025 — the lowest since before the pandemic.

📊 Wage growth has nearly halved in a year. Smaller raises + higher home prices = shrinking buying power, even with steady rates.

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Trump’s Pressure on the Fed

President Trump has demanded the Fed cut rates now, calling Chair Jerome Powell “a stubborn moron” for holding steady at 4.25%–4.5%.

• His case: Cheaper borrowing = better affordability.
• Fed’s case: Inflation risk + independence > politics.

⚖️ Trump wants big Fed rate cuts to make homes more affordable. The Fed says, “We answer to the data, not politics.”

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The Impact

• First-time buyers could save hundreds/month if rates drop.
• Current owners might finally list homes, easing supply.
• Renters might see slower rent hikes if more people buy.

🏡 Lower rates could help buyers & renters — but without lower prices, relief will be limited.

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What to Watch Next

• September Fed meeting — Will they cut?
• Home price trends — Price relief could help more than rate cuts alone.
• Regional differences — Some markets will move faster than others.

📅 Watch September’s Fed meeting & home price trends. A rate cut may help, but price relief is the real key to affordability.

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What You Can Do if You Want to Buy

“Date the rate, marry the house” — carefully
If you find the right property and can afford it now, don’t let a slightly higher rate stop you. You can refinance later if rates fall. But this works only if your monthly payment fits comfortably within your budget today.

Save more aggressively
Higher down payments shrink your loan size and can get you better rates. Funnel extra savings toward your home fund now so you’re ready when the right deal comes.

Consider alternative markets
If your target city is unaffordable, explore nearby towns or growing secondary markets where prices are more reasonable and appreciation potential remains strong.

Boost your income through investing
One way to close the affordability gap is to grow your assets while you wait. A well-managed portfolio can compound faster than a savings account — and tools like Fraywire can help you track markets, find opportunities, and research investment ideas so you’re building wealth while the housing market plays out.

Don’t get trapped waiting forever
Yes, rates may fall, but timing the housing market is as tricky as timing the stock market. Focus on what you can control: your budget, your savings rate, and your income growth.

💡 Can’t buy now? Save more, invest smarter, and be ready. Waiting for a perfect rate is risky — focus on what you can control today.

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Final Take

The housing crunch isn’t about rising rates — it’s the mix of steady-but-high borrowing costs, climbing home prices, and slowing pay growth. Even with political fireworks over the Fed, affordability won’t recover without tackling the wage–price gap. Until then, building your financial base — and using tools like Fraywire to do it — may be your best shot at closing the gap to homeownership.

🔑 Affordability won’t bounce back with a rate cut alone. Prices are climbing, paychecks are slowing — so invest, save, and prepare.

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