Abstract Since the 2000s, house prices in Germany have outpaced household incomes, with significant consequences for housing affordability. While low interest rates have partly offset the monthly burden of mortgage servicing, they have not reduced the growing barrier to market entry. The central obstacle to homeownership has therefore shifted from recurring mortgage payments to upfront cash requirements. As a result, access to homeownership depends increasingly on pre-existing wealth. Regional evidence further shows that this national trend is highly uneven across space, reflecting substantial variation in local prices, incomes, financing conditions, and acquisition costs. For many households, especially those without substantial savings or family support, the challenge is no longer primarily whether they can service a mortgage, but whether they can enter the market at all. Policies aimed only at lowering monthly financing costs therefore miss the main constraint facing wealth-poor households. Measures that reduce one-time entry costs would address the more policy-relevant dimension of today’s affordability problem.
Amaral et al. (Fri,) studied this question.