Rising housing costs have wreaked havoc on the wallets of potential home buyers as increasing mortgage rates continue to drive up prices.

High inflation has touched almost every sector of the economy, with annual consumer inflation increasing by as much as 8.5% in March. The Federal Reserve’s two rate hikes — first in March, then in May — have provided some relief, and inflation decelerated from the aforementioned 8.5% year-over-year to a slightly cooler 8.3%.

For home buyers, though, it’s been a rough couple of months. The Fed’s interest rate hikes were also a primary culprit for driving up the average rate on a 30-year fixed mortgage to 5.30% this week. This represented the highest nationwide mortgage rate since 2009, and was well above last year’s average rate of 2.94%.

During the two years after the onset of the pandemic, home buyers enjoyed relatively low rates of below 4%, on average. An increase in first-time home buyers led to a rate of demand that far outpaced housing supply, which has suffered from labor shortages and supply chain disruptions.

With mortgage rates at decade-high levels and home prices continuing to increase, the federal government has explored several options to help decrease the economic burden on American families and individuals.

Construction continues on a large multi-unit housing development in San Diego, California, U.S., September 20, 2021. REUTERSMike Blake
Construction continues on a large multi-unit housing development in San Diego, California, U.S., September 20, 2021. REUTERSMike Blake

In regard to the housing sector, White House economic adviser Jared Bernstein told Yahoo Finance Live Wednesday that the executive branch would need help from Congress in order to pursue the most effective relief options.

“Yes, we can help increase the supply of affordable housing through some of our administrative actions, working with our housing department, as well as FHA,” Bernstein said. “But we really need legislation.”

“From our perspective, what’s most important is increasing the supply of affordable housing,” he said. “And again, we have a robust plan to do so. We need congressional help on that one.”


Data from Zillow revealed that monthly mortgage payments on the typical U.S. home increased by 19.5% in the first three months of the year, signaling an abnormally high rate of growth.

“Bottom half housing is very hard to pencil out in this environment without a low income housing tax credit, without some of the credits and grants that we’ve proposed,” Bernstein said.

President Biden unveiled his plan to combat inflation on Tuesday ahead of the release of April’s consumer price index report; in it, he discussed possible solutions for slowing inflation. Most of the methods in the proposal, including increasing the nation’s housing supply, would require legislative action.

The White House recommended that Congress invest in “building more than 1 million affordable homes, including through a set of tax credits that have received bipartisan support,” in order to help lower inflation. The proposal also advocated for “expanding and improving” federal financing for the construction of new housing and using existing federal funding to eliminate barriers for creating new homes.

“The key point, without getting into too much of that granularity, is that we are acutely aware of the stressors on family budgets,” Bernstein said. “This is a president who grew up in a family that dealt with these issues every day. And so we’re doing all we can to help.”

Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.