There are many metrics to show how distorted the US housing market has become. Despite borrowing costs hitting 20 year highs, prices are hovering near record levels with benchmarks of the affordability of home ownership at the lowest levels in more than 30 years. Sales activity has slumped to levels not seen outside major financial crises.
Could an unusual but much lauded feature of the US housing market have contributed to the situation?
Thirty-year, fixed-rate mortgages dominate in the US and are chosen by around 90 per cent of all homebuyers. To their fans, they are a cornerstone of the American dream. In almost everywhere else in the world, home buyers can only dream of one as they pay mostly floating rates or face shorter repayment terms. In the US, they are largely possible only through government intervention, since many of the loans end up being guaranteed by government agencies Fannie Mae and Freddie Mac.