Greater Albuquerque Housing Partnership

A 501(c)3 Nonprofit

What Drives High Home Prices?

Housing affordability is measured by comparing house prices/rents to income. A home should cost no more than 30% of a homeowners/renters total income. Anything above that mark is considered uneconomical and a cost burden to the owner/renter. But what causes high housing cost?

  • Demand is Greater than Supply: the supply of quality homes in quality neighborhoods is limited, while the demand for such homes is always high. With a limited quantity of homes and a surplus of buyers/renters, sellers are able to command higher prices, meaning lower-earners will be priced out of the market.
  • Housing costs rise faster than wages: this causes homes and apartments to become less and less affordable over time.
  • Employment Rates: minimum wage does not provide enough income to afford market rate housing, thus the amount of people with incomes able to afford housing greatly affects housing prices and costs. Generally there are more qualified buyers than their are affordable homes.
  • Interest Rates and Loans: lower interest rates mean easier access to loans, which may cause more people to try to qualify for home mortgages. A strong economy also tends to provide more jobs, thus allowing more people to afford housing. Vice Versa, high interest rates and a poor economy tend to decrease demand for homes as more people cannot afford them