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<\/p>\nWe are living in \u201cunprecedented times\u201d when it comes to the U.S. housing market, according to experts.<\/p>\n
In the 250 years of the nation\u2019s history since its declaration of independence from Great Britain in 1776, this is the first time that Americans are struggling so much to become homeowners as a result of a widening gap between wages and home prices.<\/p>\n
Home prices have grown by roughly 60 percent since the onset of the COVID-19 pandemic, according to JP Morgan data. Mortgage rates are historically high, and have been so since 2022. And the U.S. homeownership rate hit its lowest level since 2019 last year, at 65 percent, according to Census data.<\/p>\n
\u201cI think right now the housing market is pretty unprecedented,\u201d Daryl Fairweather, chief economist at Redfin, told Newsweek. \u201cWe have the highest home prices that have ever been on record, along with pretty high mortgage rates. The mortgage rates aren\u2019t the highest we\u2019ve seen on record\u2014they exceeded 18 percent in 1981\u2014but they are higher than they have been for the last 10 years or so. <\/p>\n
\u201cAnd so housing affordability has gotten really bad, especially for young people who don\u2019t already own homes. Breaking into the housing market is incredibly tough.\u201d<\/p>\n<\/p>\n
It is a struggle that throws a hard blow to the very heart of America\u2019s identity. <\/p>\n
\u201cProperty ownership goes back to the founding of this country,” Fairweather said. “Life, liberty and property, that\u2019s what was promised to be protected. John Locke used that formulation, and it deeply influenced the Founders. The Declaration of Independence swapped in \u2018the pursuit of happiness,\u2019 but the Fifth Amendment explicitly protects property rights.<\/p>\n
\u201cThomas Jefferson really promoted this idea of the independent landowner as the foundation of democracy. Andrew Jackson later expanded political participation beyond the propertied class while pushing westward expansion.\u201d<\/p>\n
At the time, the country had homesteaders \u201cwho went out into the wilderness and onto Native American-owned or -occupied land, staking their claim. The Homestead Act of 1862 formalized this, granting 160 acres of public land to settlers\u2014land that was, in most cases, forcibly taken from Indigenous nations,\u201d Fairweather said.<\/p>\n
Read More on News<\/p>\n
Part of the whole appeal that the United States exercised on European immigrants at the time was it offered \u201cthis seeming abundance of open land,\u201d she explained, unlike Europe. <\/p>\n
\u201cObviously the Native Americans were already there, but there was an opportunity for people coming from Europe to own land that they would not have had the opportunity to own had they stayed in their countries,\u201d she said. \u201cSo this idea of owning land, it definitely goes to the core of American identity. And the structure of our entire economy.\u201d<\/p>\n
Now, that structure\u2014rooted in land-owning, slavery and blood but grown into the much more palatable dream of a white picket-fenced house and personal and financial independence\u2014is shaking and suddenly feels as fragile as a house of cards, as millions remain shut out of the dream of homeownership.<\/p>\n<\/p>\n
Broken Promise. What Went Wrong?<\/p>\n
Throughout American history, \u201cpolicymakers have encouraged homeownership as a means of building generational wealth and establishing a robust middle class,\u201d Joel Berner, senior economist at Realtor.com, told Newsweek.<\/p>\n
\u201cHomeownership really gels with American values of independence and self-reliance, and throughout American history it has become part of our culture and identity,\u201d he said.<\/p>\n
\u201cPrimarily, housing has acted as a wealth generator and wealth store for families who have been able to break into homeownership. These families can pass down wealth in the form of home equity and firmly establish future generations in the middle class or higher. Housing is also a driver of consumer spending, as homeowners continually furnish and renovate their homes.\u201d<\/p>\n
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Fairweather is largely of the same opinion. <\/p>\n
\u201cI think there\u2019s this belief in America that the landowning class, the homeowning class, has been the wealthiest class,\u201d she said. \u201cEven today, people who own homes have much of the wealth, and people who rent tend to have no wealth at all, or are actually in debt some of the time. There\u2019s this belief that kind of emerged in the 1990s and 2000s that if we just made everyone into homeowners, everybody could be middle class. Everybody could be well off in this country.\u201d <\/p>\n
But that crucial piece of the American dream was shattered after the housing bubble burst in 2007-2008, showing that the system Fairweather described wasn\u2019t sustainable, \u201cor at least the way we went about it\u2014through subprime lending and lax regulation,\u201d she said.<\/p>\n
Despite that major setback, homeownership still lives on as a key part of the American dream, with roughly two-thirds of Americans reporting that they have the goal of owning a home, according to a 2025 survey by Realtor.com. <\/p>\n
\u201cThere\u2019s still this belief that if you own a home in America, you have made it,” Fairweather said. “And we set up our tax system to reinforce that idea, that once you become a homeowner, you benefit from the tax system through the mortgage interest deduction and low property taxes, and property taxes even being deducted from federal taxes.<\/p>\n
\u201cAll of that contributes to an economy where homeowners are better off than renters.\u201d<\/p>\n
This would not be a problem if renters could see the property ladder on the horizon, as they work and save for a down payment. But the ladder has been moving ever further out of reach in the past decades, especially since the pandemic. <\/p>\n
Brad Case, Homes.com\u2019s chief residential economist, has looked at data going back to 1776, trying to find where it all went wrong. He believes the root of the current affordability crisis lies not only in the shortage that experts have been widely pointing to as the culprit over the past few years but also a tendency to look at properties as investments rather than homes. <\/p>\n
For decades, buying a home was not an easy feat for Americans. Homeownership became significantly more accessible after the introduction of the 30-year fixed-rate mortgage by the federal government in the 1930s, which opened up homebuying to millions of people.<\/p>\n
For decades after that, the system somehow worked, according to Case.<\/p>\n
\u201cUntil somewhat recently, house prices were increasing at slightly more than the rate of inflation, but so were incomes. And so incomes were keeping up with house prices,\u201d he told Newsweek. <\/p>\n
\u201cBut in the 1970s and the 1980s, mortgage rates went way up because we had a tremendous inflation problem. When mortgage rates came down from that, that\u2019s when house prices started going up more rapidly than inflation and incomes. <\/p>\n
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<\/p>\n
\u201cAnd as a result of that, some people got the idea that they should buy a house, not because they wanted a place to live, but rather because they had seen house prices going up, and so they thought it was a good investment.\u201d<\/p>\n
When you create the expectation that buying a house is a good investment and more than half the people in the country are benefiting from that as homeowners, \u201cthen suddenly you\u2019ve got the basis for public policy that forces house prices to go up even more rapidly,\u201d Case said. \u201cThat\u2019s what has broken recently.\u201d<\/p>\n
That is the reason we see resistance to building new houses despite the acknowledgment of a significant shortage across the country, Case said, especially resistance to building houses that are reasonably affordable. <\/p>\n
\u201cThe existing homeowners in any particular city will say, \u2018let\u2019s not build new houses unless they\u2019re really, really expensive.\u2019 Because if they\u2019re really, really expensive, then those people will pay high property taxes and we won\u2019t be responsible for sort of covering municipal expenses,” he said. “That\u2019s the dynamic that cropped up in the last few decades.\u201d<\/p>\n
President Donald Trump told reporters in December that he wanted to prevent home values from falling to keep homeowners from losing equity, despite promising to make homebuying and homeownership more affordable for all Americans.<\/p>\n
Is There a Way Out?<\/p>\n
The post-pandemic housing market is pretty much uncharted territory for Americans. Mortgage rates dropped to around 3 percent during the pandemic, unleashing the homebuying frenzy that, clashing with tight inventory nationwide, brought up prices.<\/p>\n
Since then, mortgage rates have roughly doubled. <\/p>\n
\u201cThat meant that a lot of people got into the housing market during 2020, 2021, and then the door shut right behind them,\u201d Fairweather said. \u201cThat has led to a housing market that is incredibly stuck, because the people who own homes don\u2019t want to give up their record-low mortgage rates. They\u2019d have to get another mortgage at prevailing rates if they wanted to move. <\/p>\n
\u201cAnd home buyers are up against high rates and high prices, so they can\u2019t afford to buy. That\u2019s why the housing market is so stuck, and it looks unlike any other period in history.\u201d<\/p>\n<\/p>\n
The U.S. housing market this year has remained sleepy through the spring, traditionally its busiest season. There are more than 400,000 more sellers in the market than buyers, but these are not \u201cserious sellers,\u201d according to Fairweather. <\/p>\n
\u201cThey are quick to delist their homes,” she said. “We\u2019re seeing a record-high share of homes being delisted. I think that just goes to show that these sellers are not really willing to meet buyers where they\u2019re at. Sellers and buyers just can\u2019t see eye-to-eye right now.\u201d<\/p>\n<\/p>\n
There is also another apparent anomaly. Normally when mortgage rates go up, home prices come down in response. But this time, \u201csupply and demand backed off at the same time,\u201d Fairweather said. \u201cSo we\u2019re just seeing fewer transactions and stubbornly high prices.\u201d<\/p>\n
According to Berner, the current market is facing \u201ca more chronic, structural challenge than it has in the past when it has been on the verge of acute collapse,\u201d he said. <\/p>\n
\u201cWe’re living in a period where the supply of homes cannot meet the demand for them. It is perhaps most similar to the period before the passage of the Homestead Act in that new homes need to be created for Americans to live in. Back then, the government just gave away land for development, which is far less of an option today.<\/p>\n
“Instead, current efforts are focusing on reducing regulatory barriers to new construction, which could have a major impact, but will deliver it in less of a direct and immediate way.\u201d<\/p>\n
There might be light at the end of the tunnel, according to Fairweather, Berner and Case, though it might be far away.<\/p>\n
The housing market this year is already recalibrating, but in an uneven way, Berner said. In some markets, primarily in the South and West, \u201cprices are dropping as the shock of the pandemic-era buying frenzy is finally absorbed and new construction is keeping pace with demand,\u201d Berner said. \u201cIn others, primarily ones in the Northeast and Midwest, new construction is limited and the markets are still struggling with diminished inventory.\u201d<\/p>\n
The future will bring more affordability to the U.S. housing market, Fairweather said, as wages will start to catch up with slower home price growth and mortgage rates will likely remain stable. <\/p>\n
Baby boomers, a big generation owning an outsized share of homes in the U.S., are also expected to leave their homes in the coming years and decades. Fairweather thinks it will make it more affordable for younger generations to buy a home, though she fears it will become more expensive to own that same home. <\/p>\n
\u201cInsurance costs are rising with climate change. Homes are old and they\u2019re going to require a lot of upkeep and maintenance, especially those homes that baby boomers are passing down, and those homes are going to be old and out-of-date,\u201d she said.<\/p>\n
\u201cAnd it\u2019s still going to be a problem that there is not enough housing in the places that have the best jobs, the places that people most want to live. Just because baby boomers are selling their homes in Florida and Arizona doesn\u2019t mean that housing is going to get more affordable in the Bay Area. We still need to build housing in the places that have historically not built enough.\u201d<\/p>\n
In short, housing will likely get more affordable in the future, but the fight for a more affordable and sustainable housing market will continue on, Fairweather said.<\/p>\n
Case said: \u201cThe solution to affordability is absolutely nothing more than income growth. And to the extent that we can achieve income growth, great. <\/p>\n
\u201cBut there\u2019s also a behavioral problem to target, people have this idea that you should buy a house as an investment. You should never buy a house that has an investment, you should buy a house because that\u2019s where you want to live and you can\u2019t live there unless you buy it.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"We are living in \u201cunprecedented times\u201d when it comes to the U.S. housing market, according to experts. In…\n","protected":false},"author":2,"featured_media":744592,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[117286,12832,28,101,12189,2053,5456,162,3657],"class_list":["post-744591","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-250th-anniversary","tag-affordability","tag-business","tag-economy","tag-home-prices","tag-housing","tag-housing-market","tag-investment","tag-u-s-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/744591","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=744591"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/744591\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/744592"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=744591"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=744591"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=744591"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}