The affordability angle: How bad is it, really?

It’s a midterm year, and that makes all things economy loom large

And when it comes to the economy, affordability tops the list. We all have our favorite anecdotes — Am I really paying this much for eggs?! — but what does the data tell us?

We dug in across five essential categories: housing, food, transportation, apparel, and healthcare.¹ We looked at inflation over the long term (since 2015) and shorter periods (2020, 2022, and 2025). We also looked at what we call “wallet share,” or the share of total expenditures consumers are spending on these categories.² And, of course, we tracked the “feels,” courtesy of surveys like the University of Michigan sentiment survey, while noting proposed policies for different categories.

So why the bad vibes? A few theories.

First, the rate of inflation has slowed since 2022, but the price level hasn’t returned to what it was (and probably never will).³ Relatedly, while the long-term and near-term numbers are largely benign, the relative growth of expenditures for the period from 2020 to 2024 was painful and likely won't be soon forgotten, regardless of how conditions have improved since. And finally, while income has grown more than the wallet share for these essentials over the long term, consumers aren’t confronted with income each time they go to a restaurant or pay for their groceries. What they see is the bill.

One additional point. While the aggregate picture is better than one might guess, there are some areas of affordability — like homebuying — that are both pretty bad, number-wise, and really hard to ignore.

We get into all the details below, along with an outlook for each section and the potential economic or market implications.

Housing

Conditions

Since 2015, housing and related costs —  which include not only rent and mortgage but also things like utilities, electricity, and furniture — have experienced only a slight move higher as a percentage of annual expenditures (wallet share) for U.S. consumers. That’s in spite of the rapid growth in rent and home prices that has outpaced overall inflation.
But there is still an affordability concern. The massive home price appreciation has created a truly staggering amount of wealth for homeowners, but it has also shut the door on many Americans who would like to buy a home. Meanwhile, we've seen upward pressure on rents until only very recently.

Vibes

Bad. Not only for homes, but also big-ticket items like household appliances. The risk that “panic buying” might have ignited an inflationary spiral has receded, but the percentage 
of consumers who view prices as “too high to buy” (or plainly can’t afford to buy) is high 
and rising.

Policy

At least three policy initiatives have been proposed at the federal level, including a ban on large institutional ownership of single-family homes, mandated buying of mortgage bonds by government-sponsored enterprises (GSEs) (Fannie Mae and Freddie Mac) intended to apply downward pressure on mortgage rates, and incentives designed to encourage local and state governments to ease building codes and restrictions.⁴

However well intended, two of these three policies require cooperation of Congress, coordination with other areas of the administration, or years to create meaningful impact. Thus, we see no 2026 silver bullet here.

Outlook

We believe modest improvement in home affordability in 2026 is possible: Mortgage rates have edged lower, and for-sale inventory has improved.⁵ However, we view a meaningful correction in home prices as unlikely given the chronically under-supplied nature of the U.S. housing market. Without it, our research suggests we may not reach normal levels of affordability for another two to three years.

Implications

The housing market unquestionably has a sizable cyclical impact on the economy. It influences the wealth effect⁷ and therefore consumer spending. Homebuilding activity tends to drive economic activity across labor, commodity, and consumer markets.

At the moment, the housing market’s impact on the economy and markets is mixed due to the conflicting wealth effect and home affordability. Meanwhile, homebuilding activity remains muted,⁸ suppressing all the economic juice that comes with it until affordability improves.

Food

Conditions

Food costs rose meaningfully during the post-pandemic inflation surge and only recently returned toward rates that approximate broader core inflation. The surge was (and still is) uneven, however, with the cost of food consumed away from home rising faster than the cost of food prepared at home. This likely reflects rising wage and operating costs for restaurants.

We see the reverse trend in the wallet share: Across all income quintiles, food at home now consumes a larger share of expenditures than it did in 2015.9 However, the opposite is true for food consumed away from home. In fact, we see a decrease across all income quintiles since 2015 (note that the share of expenditures spent at restaurants has skyrocketed since 2020, reflecting the widespread shutdowns during the pandemic). The longer-term trend doesn't mean dining out is cheaper than it was in 2015 — data strongly suggests otherwise.

But it does suggest consumers have spent less money on the category overall.¹⁰

Interestingly, for food as an aggregated category, the share of annual expenditures has moved higher but not markedly so. However, because food represents a meaningful percentage of the U.S. consumer’s budget — the share typically ranges from 11% to 16% — even modest increases in price can have a big impact on budgets and consumer perception.

Vibes

Bad. High food prices get a lot of attention in the media, especially around elections. Recent data from the Conference Board suggests consumers believe higher inflation at restaurants will persist.

Policy

Likely, no silver bullet here, either. While politically seductive, the idea of price controls ignores significant volatility in commodity prices that serve as foodstuff inputs as well as the very slim margins faced by farmers, grocers, and other members of the supply chain — many of whom are already heavily subsidized. Previous attempts have created negative side effects such as shortages or have been met with outright failure.

Outlook

In 2025, food price inflation largely returned to trend. While the cost of food consumed away from home continues to outpace that for home-cooked meals, more moderate wage growth among leisure and hospitality workers — together with a continued substitution effect that has kept the category’s wallet share in check — should help reverse that trend.

Implications

An economic consequence of higher food costs could be lower discretionary spending/saving. However, it seems consumers across income quintiles may have largely kept their food budgets consistent by limiting their spend on food away from home. That perhaps weighed on the restaurants but otherwise softened the impact of declining food affordability on the overall economy.

Transportation

Conditions

Transportation spending spans a wide range of categories, including vehicle purchases, maintenance, insurance, fuel, and public transportation. On the whole, transportation has consumed less consumer wallet share since 2015, but the effects vary widely across the types of goods and services being consumed.

Not surprisingly, a “pandemic effect” — inflation resulting from the sudden stop of COVID — is obvious in big-ticket categories like purchases of new and used cars, but in many cases this represented simply a pull-forward of demand that tends to wash out over the longer term. Public transportation — a sub-category that includes passenger air service — is an exception: It increased across the board, perhaps reflecting the “revenge travel” boom following COVID shutdowns.

One of the most-watched areas — gasoline — has seen a notable fall from 2022 levels, even as the Iranian conflict threatens to change that. This has a big impact on sentiment because gas is a regular and highly variable cost across income quintiles.

Vibes

Good and bad. Gasoline prices had fallen, though they are on the rise again (more on this below). The bad: Like housing, “panic buying” is no longer a threat for vehicle prices, but for those who view prices as too high to buy (or simply can’t afford to buy), the price is stubbornly high.

Policy

As part of an affordability push, the Trump administration has introduced permitting reform to speed up approval of oil and gas leases and lifted drilling restrictions on federal lands. Meanwhile, an extension on limited tax-deductibility of interest paid on auto loans for the purchase of domestically built vehicles aims to help reduce the cost burden of purchasing a new vehicle, even as tariff policies work at cross-purposes to that goal.

Outlook

We wouldn’t expect the budget burden represented by transportation spending to ease significantly in the near term, nor would we expect it to worsen materially over the longer term.

That said, geopolitics and global supply/demand dynamics exert significant influence over prices paid for transportation, particularly fuel. Now, it’s true that the shale revolution and the U.S.'s new status as the world’s largest oil and natural gas producer¹¹ should grant the U.S. economy a measure of insulation; the promise of a revival in production from Venezuela is also an incremental positive.

Still, recent events in the Middle East mean that, at least in the near term, gas prices face new price pressure, particularly if sustained durable economic growth keeps demand intact for airfare, cars, and travel.

Implications

Due to generally inelastic demand, consumers across income quintiles feel the volatility in gas prices, for better or for worse. And when it is for worse, the punishment is likely greater at lower-income quintiles. So, today, we’re looking at a double-edged sword, with the gains from the past year offering some relief, and the near-term supply shock undoing some of that progress.

Healthcare

Conditions

A seemingly unmovable cloud hangs over the healthcare sector. Costs here include insurance, medical services, drugs, and medical supplies, and sentiment across the board is challenged by the unpredictability of costs and a perception of runaway expenses.

However, as we look back at data from 2015 to 2024, most income quintiles saw their share of healthcare spend remain largely static on a point-to-point basis, with the exception of the lowest income quintile. There, consumers spent more across all subcategories within healthcare — with increases in medical services and medical supplies especially acute.

From an inflation perspective, it’s notable that healthcare costs have actually tended to run at — or even slightly below — core inflation in recent years. However, consumer experience can be heavily influenced by things like subsidies, which aren’t necessarily well represented in reported data.

Vibes

Bad. As with food, elections tend to keep drug prices front-of-mind for consumers. More than one in five consumers think they’ll be paying more for medical care in the next six months than they did last year.¹²

Policy

As has been generally the case for most administrations, healthcare sits squarely in the Trump administration's crosshairs. Current initiatives aimed at reducing drug costs include “most-favored-nation pricing” and trumprx.gov, a platform designed to reduce drug costs for the uninsured and those with high-deductible plans. Other proposals include direct-to-consumer reimbursement of Affordable Care Act (ACA) subsides and changes in Centers for Medicare & Medicaid Services (CMS) reimbursement rates, efforts designed to make insurance more competitive and fiscally less burdensome.

Outlook

Healthcare spending tends to be relatively inelastic, meaning that future affordability will be driven by how quickly healthcare costs are rising relative to other prices in consumer budgets. It’s therefore notable that drug price inflation — understandably the target of the administration’s most robust initiatives so far given their visibility — have been relatively tame during this episode. Efforts to slow medical services inflation, which is currently running above core inflation, are important to improving healthcare affordability.¹³

Implications

As with other categories, lower healthcare costs may support greater discretionary spending or savings. From the policy perspective, there’s a potential market impact to consider. Unlike other areas in our affordability study, healthcare is among the largest sectors in the Bloomberg 500 Index. Changing regulations that impact business models could have a bigger impact on the broader market, for better or for worse.

Apparel

Conditions

Apparel is one of the few areas within our study where affordability has unequivocally improved. Across all income quintiles, the share of expenditures going to apparel has fallen since 2015. Of course there was a pandemic effect here; the share of expenditures spent on clothes plummeted in 2020 and so accelerated in the years since, but that’s been a result of normalization rather than a change in affordability.

Inflation numbers tell a similar story: Price growth in apparel has been consistently below core inflation since at least 2025.

Vibes

Good. Apparel is one category where price growth has been tame, and there is little reason we expect that to change.

Policy

No policies under discussion.

Outlook

We see little reason for either affordability or wallet share to change significantly here. Return-to-office initiatives seem to have stabilized around a new normal that at least partially embraces hybrid work, meaning that demand for apparel — and therefore price and wallet-share growth — may remain constrained.

Implications

Apparel accounts for a marginal share of annual expenditures across all income quintiles; numbers range between 2% and 3%. Thus, while lower — or higher — prices would of course matter, fluctuations here don't necessarily change the spending patterns or the sentiment of U.S. consumers.

Overview I Research spotlight: Affordability