American families have faced persistent affordability challenges since 2022, though the situation showed marked improvement throughout 2024 and into early 2025 before recent geopolitical developments reversed progress [1]. According to the analysis, while the average American's weekly paycheck grew roughly 17% during President Biden's term, it bought about 4% less due to the cost-of-living crisis that began when prices rose significantly faster than earnings [1]. The affordability crisis was compounded by 40-year-high inflation that prompted the fastest rise in interest rates in decades, creating a "deadly one-two punch" for homeownership as higher home prices and mortgage interest rates combined to double the monthly payment on a median-priced home in just four years [1].
However, real (inflation-adjusted) weekly paychecks rose roughly 2% on average from January 2025 through February 2025, reversing half the cumulative losses from the Biden years as income growth outpaced inflation [1]. This improvement was attributed to tax and regulatory reform, along with sound energy policy, which were spurring economic activity and wage growth while keeping inflation down [1]. The positive momentum was disrupted when the Iran war broke out, causing global energy markets and supply chains to be severely disrupted [1]. Oil prices quickly rose from $60-$70 per barrel to $100-$120, with prices at the pump soon following and the energy shock spilling over to more sectors of the economy [1].
The cascading economic effects of the energy shock are broad-based, as energy serves as an input cost in every product and service consumers buy [1]. Food prices have risen due to increased costs for diesel-powered tractors, fertilizer synthesized from natural gas, and transportation via truck and rail [1]. Prices for airfares, plastics, and manufactured goods have all increased because of the energy shock [1]. The reversal in affordability progress is evident in housing, where homeownership affordability hit a three-year high in February before deteriorating [1]. The analysis suggests that once the wars with Iran and in Ukraine conclude, affordability will start to improve again [1].
CONCLUSION
Recent geopolitical conflicts have temporarily halted the U.S. affordability recovery that was underway in early 2025, with energy shocks driving oil prices from $60-70 to $100-120 per barrel and cascading cost increases across consumer goods and services. While the analysis characterizes this setback as temporary and contingent on conflict resolution, the broad-based nature of energy-driven inflation poses near-term headwinds for consumer purchasing power and housing affordability. Market participants should monitor energy prices and geopolitical developments as key indicators for the trajectory of inflation and consumer affordability in coming months.