Affording the American Dream: Analyzing the Economic Factors Shaping U.S. Housing Affordability
Category
Business, Education and Humanities
Department
Finance and Economics
Student Status
Undergraduate
Research Advisor
Dr. Michael Davidsson
Document Type
Event
Location
Meadowlark
Start Date
10-4-2025 11:00 AM
End Date
10-4-2025 11:00 AM
Description
Housing affordability is a critical component of financial stability and quality of life for many Americans. Over the past three decades, the U.S. housing market has undergone substantial changes due to economic shifts, with varying impacts on affordability across different regions. The purpose of this study is to examine national real estate trends from 1995 to 2023 to explore the relationship between economic factors and housing affordability. Using the Mortgage to Income Ratio (MTI) as the measure for housing affordability this study uses a pooled regression model with time-series data, this research incorporates five key independent variables: median household income, inflation rate, 30-year fixed mortgage rate, median home price, and unemployment rate. The data was obtained from The Federal Reserve Economic Data (FRED) and includes 1,450 observations from all 50 US states. To estimate the results using causality we expect higher mortgage rates, unemployment, inflation, and home prices will negatively impact affordability and higher household income should positively impact affordability. Through this study I hope to test this hypothesis and quantify the effects of economic variables and the extent to which they affect housing affordability and real estate trends. These findings could help both buyers and sellers in the housing market make more informed decisions about the best time to buy or sell based on the current state of the economy.
Affording the American Dream: Analyzing the Economic Factors Shaping U.S. Housing Affordability
Meadowlark
Housing affordability is a critical component of financial stability and quality of life for many Americans. Over the past three decades, the U.S. housing market has undergone substantial changes due to economic shifts, with varying impacts on affordability across different regions. The purpose of this study is to examine national real estate trends from 1995 to 2023 to explore the relationship between economic factors and housing affordability. Using the Mortgage to Income Ratio (MTI) as the measure for housing affordability this study uses a pooled regression model with time-series data, this research incorporates five key independent variables: median household income, inflation rate, 30-year fixed mortgage rate, median home price, and unemployment rate. The data was obtained from The Federal Reserve Economic Data (FRED) and includes 1,450 observations from all 50 US states. To estimate the results using causality we expect higher mortgage rates, unemployment, inflation, and home prices will negatively impact affordability and higher household income should positively impact affordability. Through this study I hope to test this hypothesis and quantify the effects of economic variables and the extent to which they affect housing affordability and real estate trends. These findings could help both buyers and sellers in the housing market make more informed decisions about the best time to buy or sell based on the current state of the economy.
