Moira Gallagher, 38, sees buying a house in Anchorage as a way to achieve financial stability for her growing family. Despite having a six-figure household income and steady employment, she and her husband have faced challenges in making a purchase. High mortgage rates, limited housing supply, and historically poor affordability have made it difficult for Ms. Gallagher, an economic researcher expecting her third child, to find a three- or four-bedroom home in a good school district that is both available and affordable.
The issue of housing affordability is not unique to Anchorage but is a global concern in both developed and emerging economies. Central banks have been using high interest rates to combat inflation, leading to elevated mortgage rates that make it expensive for borrowers to buy homes and for builders to fund new construction projects.
While some central banks are now lowering interest rates, experts caution that this alone will not solve the affordability crisis in the housing market. Long-standing market trends such as high labor costs, expensive materials, and regulatory constraints continue to impede the supply of affordable homes. Demographic shifts also contribute to increased housing demand, further complicating the situation.
Elected officials worldwide are beginning to address the housing crisis, with proposals ranging from subsidizing home construction to providing assistance for first-time homebuyers. However, experts warn that solving the affordability problem will not be quick or easy, as it has been years in the making.
In the United States, for example, home prices and rents have outpaced wage growth since 2012, leading to historically poor levels of affordability. While lower interest rates may make it easier for families to afford mortgages, the impact on overall housing supply and demand remains uncertain.
Lower interest rates could potentially stimulate housing construction and make rental housing more affordable, but challenges such as expensive financing and regulatory barriers still exist. Overall, while lower rates may improve affordability to some extent, they are unlikely to fully address the housing crisis that has been building for years.