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A new S&P Global Ratings report forecasts that 60% of U.S. households will be priced out of the market for starter homes by the end of 2025, a daunting outlook even as the market begins to cool and home builders prep for a potential recession. A widening affordability crisis already priced out 40% of households across the U.S., but those with fixed-rate mortgages are less susceptible to climbing rates down the line. Instead, prospective homeowners will feel the sting of higher monthly payments in a market slowly normalizing after two frenzied years for homebuying.

Americans in the bottom one-fifth income bracket earning up to $27,000 a year would need to spend at least 100% of their income to afford a monthly mortgage payment, while middle-income borrowers are forced to set aside 26.7% of their income, a figure likely to rise further by the end of the year, reports.

S&P’s report pointed to the roughly 20% annual rise in home prices and a more “hawkish” Federal Reserve as key culprits of the housing “affordability crunch,” with the central bank’s inflation-fighting policies pushing 30-year mortgage rates to 5.18% in the second quarter, a 13-year high.

The Fed is expected to raise interest rates by another 75 basis points next week, and continue hiking rates aggressively this fall as it looks to tamp down inflation that hit a 41-year high of 9.1% in June. The yield on the benchmark 10-year Treasury note climbed back above 3% and stocks rallied sharply for the week.

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