Why are voters still frustrated with the economy? Blame home prices

Voters feel the country's housing affordability crisis is driving their frustration with the economy ahead of this year's presidential election.  

Experts believe the root of the problem lies in the fact that the country has failed to build enough homes for its growing population, making the American dream even more unattainable despite President Joe Biden's assurances that the U.S. economy is strong and underscoring the degree to which Republican Donald Trump, the former president and presumptive GOP nominee for 2024, has largely overlooked the shortage.

The lack of housing has caused a record number of renters to devote an excessive amount of income to housing, according to a Harvard University analysis. Not enough homes are for sale or being built, keeping prices elevated. Average mortgage rates have more than doubled and further worsened affordability.

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In fact, the Census Bureau reported that homeownership fell slightly at the end of last year in an otherwise solid economy. If it wasn’t for shelter costs, inflation — Biden’s most pronounced economic problem — would be running at a healthy and stable 1.8%. Instead, it's hovering around 3.2%.

Administration officials are confident that shelter inflation will soon cool, but the damage across several years is apparent to advocates and economists.

Rates currently average about 6.74%. If they dropped closer to 6%, the odds of a Biden victory would increase. But rates moving near 8% might enable Trump to prevail, Zandi said.

Biden, a Democrat, acknowledged the pain many are feeling in his State of the Union address earlier this month and in his budget proposal released on Monday.

The president wants to fund the building and preservation of 2 million housing units — a meaningful sum, but not enough to solve the shortage. He also proposed a tax credit worth up to $10,000 to homebuyers. Over the past three years, he has increased rental assistance to 100,000 households.

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"The bottom line is we have to build, build, build," Biden said Monday in a speech to the National League of Cities. "That’s how we bring down housing costs for good."

Lower rates might play well with voters, but most economists say they would at best offer temporary financial relief. Purchase prices would likely adjust upward in response to greater demand from falling rates.

Construction, the more enduring solution, would take years to achieve and require new rules by states and cities. The administration is trying to incentivize zoning changes, but the major choices are outside the White House's control.

The general rule of thumb is that people should pay no more than 30% of their income on rent or a mortgage. A typical household looking to buy a home would have to devote 41% of its income to mortgage payments, according to Redfin.

The Associated Press contributed to this report. This story was reported from Los Angeles.