All Into Account: No Quick Fix for US Housing Affordability - Affordability Challenges are Reshaping Markets

[on-hold music] Hello, this is Joyce Chang, Chair of Global Research at J.P. Morgan. You're listening to All Into Account, our global cross-asset strategy podcast where we break down the key trends impacting financial markets. Housing affordability is one of the most persistent and most consequential post-pandemic cost-of-living challenges. US mortgage rates are now topping 7% as Treasury yields have risen, putting an even deeper squeeze on housing affordability. We've just published our annual housing report coordinated by Mohammed Hossain, who's on my strategic research team, and the takeaway is that affordability is at a critical inflection point across many global markets. In the US, the core issue remains a chronic shortage of homes relative to demand, even after a period of unprecedented household wealth gains and the passage of federal legislation to boost housing supply and lower costs. Buyers are still being priced out as higher mortgage rates, elevated monthly payments, and rising ownership costs continue to strain affordability. And importantly, this isn't just a US story. Housing affordability is a global phenomenon, but the constraints differ market to market, which means the solutions have to be localized. So today we're going to unpack what's driving the affordability squeeze, what policy can realistically do, and what we're watching across the housing and commercial real estate markets. Mohammed, over to you.

Thank you, Joyce, and it's great to have our research colleagues John Chang, Anthony Bennett, and Arjun, as well as J.P. Morgan's Head of Commercial Real Estate, Michelle, join us for this discussion. We have a cross-section of experts covering housing from the macro market's perspective and real estate developments on the ground. We'll start with the supply-demand imbalance in US housing, move to who's being impacted and how, touch on the new home sales market and financing conditions, discuss recent federal policy, then broaden out to commercial real estate. Then we'll close with the spillover effects to corporate credit and what JP Morgan Chase is doing to support housing supply and affordability. So John, let's start with the supply shortage. How bad are housing affordability dynamics versus history, and how big is the housing supply deficit versus demand? What actions need to be taken to meaningfully address the supply side and unlock the housing market and restore affordability?

Thanks. Uh, thanks for the question and, uh, thanks for having me, Mohammed. So when you talk about affordability, uh, that... We definitely are at one of the worst levels since the financial crisis. One way you mea-measure that is just the cost to income. In other words, the, the cost to income for, for the-- to pur- for the renter to purchase the median price home based on the median income is, uh, roughly around, uh, 50% of their income. So that's a real challenge in that you haven't really seen that since the financial crisis. The big dynamic is around the, uh, additionally is around current mortgage holders which, where their cost to income is only around twenty to twenty-five percent of their, their income just du-due to them being