For generations, owning a home has represented something larger than having a roof over your head.

It has been one of the primary ways ordinary American families accumulated wealth, established financial stability, funded retirement, helped their children attend college, started businesses, and eventually passed assets to the next generation.

That relationship between housing and wealth is still clearly visible today. According to the Federal Reserve's most recent Survey of Consumer Finances, median net worth among homeowners reached approximately $396,200 in 2022. Among renters and other non-homeowners, median net worth was only about $10,400.

That enormous difference does not mean simply purchasing a home automatically makes someone wealthy. Homeowners are also generally older and often have higher incomes. But housing has historically operated as a kind of forced savings account: every mortgage payment can gradually convert income into equity, while appreciation can compound that wealth over decades.

For millions of American families, this was one of the foundations of the modern middle class.

Today, however, getting onto that ladder has become considerably harder.

Home prices have climbed dramatically during the past decade. Mortgage rates are much higher than they were during the pandemic. Taxes, insurance, maintenance and construction costs have increased. Starter homes remain scarce in many communities. And even though the frenzied bidding wars of 2021 and 2022 have cooled considerably in many areas, affordability remains one of the largest obstacles confronting prospective homeowners.

Understanding why requires going much further back than COVID-19.

The housing crisis America faces in 2026 was years in the making.

Homeownership Helped Build the Postwar Middle Class

The United States experienced one of history's great expansions of homeownership in the years following World War II.

In 1940, only 43.6 percent of American households owned their homes.

By 1950, that number had jumped to 55 percent.

By 1960, it had reached 61.9 percent.

That transformation did not happen accidentally.

Several powerful forces converged after World War II.

Millions of servicemembers returned home. Families formed at extraordinary rates. American industry shifted from wartime production toward consumer goods and residential construction. Automobiles became increasingly affordable, highways expanded, suburbs grew and enormous amounts of undeveloped land surrounding cities became accessible.

Federal policy also played a tremendous role.

The Federal Housing Administration had already helped popularize long-term amortizing mortgages by insuring loans issued by private lenders. FHA continues performing that function today and has insured more than 50 million mortgages since 1934.

Then came the Servicemen's Readjustment Act of 1944—the GI Bill.

Among its provisions was a federal guarantee for mortgages made to eligible veterans.

By 1955, approximately 4.3 million GI Bill home loans totaling roughly $33 billion had been granted. Veterans were responsible for purchasing approximately 20 percent of new homes constructed during the postwar period.

The original VA home-loan benefit guaranteed part of the veteran's mortgage, reducing the lender's risk and helping servicemembers obtain financing on favorable terms.

The result was transformational.

A factory worker, mechanic, police officer, tradesman or returning soldier who might never have been able to purchase a home under the financing system that existed several decades earlier could obtain a long-term mortgage and slowly build equity.

Entire suburban communities developed around that model.

There was also a darker side to this history that shouldn't be ignored. Discriminatory lending, restrictive covenants, segregation and redlining prevented many Black Americans and other minorities from receiving the same benefits of the postwar housing boom. Even veterans who theoretically qualified for federal programs sometimes encountered discrimination from lenders, real-estate professionals and local institutions.

The postwar homeownership boom therefore created enormous wealth—but access to that wealth-building engine was not equally distributed.

Nevertheless, nationally, housing became deeply intertwined with America's growing middle class.

And for decades the basic bargain seemed attainable:

• Work.
• Save a down payment.
• Buy a modest home.
• Pay the mortgage.
• Build equity.
• Eventually own the house outright.

The problem today is that the price of entering that system has risen much faster than many households can comfortably absorb.

The Housing Market in 2026

The housing market entering the second half of 2026 is unusual.

It is neither a traditional housing boom nor a traditional housing crash.

Existing-home sales were running at an annualized rate of approximately 4.09 million in June 2026, relatively weak by historical standards. Yet the median existing-home price reached $440,600, an all-time high for that month's report and approximately 1.8 percent higher than a year earlier.

Inventory has improved.

There was approximately 4.6 months of existing-home supply in June 2026, considerably healthier than the extreme shortages seen during the pandemic housing boom.

New construction is providing some relief as well.

The median price of a newly constructed home sold in June 2026 was approximately $398,300, actually below the median existing-home price. Builders in some markets have been cutting prices, constructing smaller homes or offering financing incentives to attract buyers.

But affordability remains difficult primarily because buyers face the combination of expensive houses and expensive financing.

As of August 6, 2026, Freddie Mac reported an average 30-year fixed mortgage rate of 6.69 percent.

Consider a simplified example.

A buyer purchasing a $400,000 house with 20 percent down would borrow $320,000.

At a 3 percent mortgage rate, principal and interest would be approximately $1,349 per month.

At 6.69 percent, the same $320,000 mortgage costs approximately $2,063 per month.

That is about $714 more every month, before property taxes, homeowners insurance or HOA fees are added.

Nothing about the house changed.

Only the cost of money changed.

That illustrates one of the defining problems of today's market.

America did not simply experience a housing-price increase.

It experienced a housing-price increase followed by an interest-rate increase.

Buyers are dealing with both simultaneously.

Root Cause No. 1: America Didn't Build Enough Homes

Perhaps the single most important long-term factor behind today's housing affordability problem is supply.

America simply failed to construct enough housing in many of the places where people wanted to live.

Freddie Mac estimates that the United States was still short approximately 3.7 million housing units as of the third quarter of 2024.

The roots of that shortage can be traced partly to the 2008 housing crash.

During the housing boom of the early 2000s, builders constructed homes aggressively.

Then the bubble collapsed.

Foreclosures exploded.

Builders went bankrupt.

Construction employment disappeared.

Banks became far more cautious about development lending.

Homebuilders who survived became more conservative.

Housing construction consequently remained depressed for years.

Meanwhile, the population continued growing and new households continued forming.

Eventually demand caught back up.

Construction did not.

The shortage accumulated slowly.

For years it attracted limited public attention because mortgage rates remained relatively low and housing remained affordable in large portions of the country.

Then demand surged.

Suddenly the underlying shortage became impossible to ignore.

The Disappearing Starter Home

Another supply problem involves what builders construct.

A housing unit is not automatically an affordable housing unit.

Builders face costs for land, financing, permitting, labor, utilities, materials, roads and regulatory compliance.

Many of those costs are largely fixed regardless of whether the finished house sells for $250,000 or $600,000.

That creates an economic incentive to construct larger or more expensive homes where profit margins are better.

The traditional small starter home—a modest two- or three-bedroom house purchased by a young family—has consequently become difficult to build profitably in many markets.

This is especially true where the land underneath the house is already expensive.

If a buildable lot costs $150,000 before construction even begins, producing a $200,000 starter house becomes virtually impossible.

The result is a strange situation:

America may be constructing houses while still failing to construct enough houses first-time buyers can afford.

Zoning and Government Regulation

Government regulation is another significant piece of the puzzle.

This issue can become politically charged because many regulations exist for legitimate reasons.

Building codes protect occupants.

Environmental regulations protect wetlands, drinking water and ecosystems.

Fire codes save lives.

Planning rules prevent factories, hazardous facilities and incompatible land uses from being placed directly next to homes.

The question is therefore not whether housing should be regulated.

It is whether some regulations unnecessarily restrict housing supply or make housing substantially more expensive without providing an equivalent public benefit.

HUD research has repeatedly identified restrictive land-use policies as a contributor to housing shortages and higher costs.

Examples include:

• Large minimum lot sizes.
• Single-family-only zoning.
• Restrictions on duplexes, townhouses and accessory dwelling units.
• Maximum building heights.
• Minimum parking requirements.
• Density restrictions.
• Lengthy permitting procedures.
• Environmental review delays.
• Development impact fees.
• Architectural requirements.
• Community approval processes that can take years.

Each rule may appear relatively small individually.

Together they can dramatically affect the economics of construction.

Imagine a developer purchases five acres.

Under one zoning code, the property might support 50 townhouses.

Under another, minimum-lot requirements may permit only 15 detached homes.

The cost of the land must now be spread across 15 homes instead of 50.

The cost per home rises dramatically.

HUD has specifically noted that density limitations, height restrictions, parking requirements, permitting delays and community opposition can constrain housing development and drive land prices higher.

There is also the political phenomenon often called NIMBYism—"Not In My Backyard."

Existing residents may support affordable housing in theory while opposing apartments, townhomes or smaller homes near their own neighborhoods.

Local elected officials respond to voters.

Projects get downsized, delayed or canceled.

Over decades, those individual decisions can produce regional housing shortages.

This does not mean every proposed development should automatically be approved.

Communities must consider traffic, schools, water, sewage, roads, environmental impacts and neighborhood character.

But there is an unavoidable mathematical reality:

A growing population cannot have affordable housing indefinitely if communities simultaneously refuse to allow additional housing to be constructed.

Land Has Become More Expensive

The price of a house consists of more than lumber and drywall.

It also includes the land.

In many desirable parts of the country, the land itself has become extremely expensive.

Scarcity matters.

There is only so much waterfront.

Only so much property within convenient commuting distance of Manhattan, Boston, Washington, San Francisco or Los Angeles.

Only so many homes in desirable school districts.

Only so many lots near beaches, mountains, downtown districts or major employment centers.

When affluent buyers compete for those locations, land values increase.

Once land becomes expensive, almost everything built on it becomes expensive as well.

This is why housing affordability can vary so dramatically across America.

The country does not have one housing market.

It has thousands of interconnected local markets.

A $400,000 budget that struggles to purchase a modest home near New York City may purchase a large property in parts of the Midwest.

Then COVID Changed Everything

The housing shortage already existed when COVID-19 arrived in early 2020.

The pandemic poured gasoline on it.

Several things happened simultaneously.

First, mortgage rates collapsed.

The Federal Reserve dramatically loosened monetary policy as the economy shut down, and mortgage rates eventually fell below 3 percent.

Freddie Mac reported that the average 30-year fixed mortgage rate was approximately 2.9 percent during the first half of 2021.

Cheap financing dramatically increased what buyers could afford to borrow.

Second, millions of Americans suddenly reconsidered what they wanted from a house.

Someone living in a 900-square-foot city apartment might previously have spent most of the day at an office.

During lockdowns, that apartment became the office.

And the school.

And the gym.

And the restaurant.

And the entertainment center.

Space became much more valuable.

A Federal Reserve advisory report from 2021 noted that remote work, remote schooling and social distancing increased demand for different housing sizes, configurations and locations.

People wanted home offices.

Backyards.

Garages.

Extra bedrooms.

Outdoor space.

And many no longer needed to live five miles from the office.

The Great Migration Away From Some Cities

Remote work changed geographic demand.

Workers who previously had to commute into Manhattan, San Francisco, Boston, Washington or other major employment centers suddenly had options.

Some moved into outer suburbs.

Others moved into smaller cities.

Others relocated across state lines.

High-cost metropolitan workers could bring relatively high salaries into lower-cost housing markets.

This produced an enormous purchasing-power imbalance in some communities.

Imagine a family leaving a market where an ordinary house costs $900,000.

They sell and arrive in a community where comparable houses historically cost $350,000.

Paying $425,000 may seem inexpensive to them.

To the local buyer earning local wages, however, that same price increase can be devastating.

This happened throughout portions of the Sun Belt, Mountain West and smaller metropolitan areas.

States including Florida, Texas, Arizona, Tennessee and the Carolinas experienced significant population and housing-demand shifts.

Rural vacation communities experienced similar pressures as people purchased second homes or relocated permanently.

COVID didn't create America's housing shortage.

It redistributed housing demand extremely quickly and exposed shortages that had been developing for years.

Construction Costs Exploded

At almost exactly the same time buyers were rushing into the market, builders encountered severe supply-chain problems.

Factories closed.

Ports became congested.

Shipping costs increased.

Lumber prices soared.

Steel increased.

Appliances became difficult to obtain.

Windows, garage doors, electrical equipment and mechanical components experienced long delivery times.

The Bureau of Labor Statistics reported that prices for many construction inputs climbed sharply after 2020 and remained above pre-pandemic levels even after some shortages eased. Steel mill product prices, for example, rose 85.3 percent between February 2020 and May 2023.

Builders passed those costs to buyers.

Even after individual commodities such as lumber declined, the total cost of construction did not simply reset to 2019 levels.

Labor, concrete, equipment, insurance, financing and subcontractor costs remained elevated.

Construction Labor Is Another Constraint

Building houses requires people.

• Carpenters.
• Electricians.
• Plumbers.
• Masons.
• Roofers.
• Heavy-equipment operators.
• HVAC technicians.
• Engineers.
• Architects.
• Inspectors.

The construction industry has struggled for years to maintain sufficient skilled labor in many regions.

A shortage of skilled workers raises wages and slows construction schedules.

Longer construction schedules then increase financing costs.

Those financing costs eventually appear in the sale price.

This is one reason improving housing supply cannot simply be accomplished by announcing that America should "build several million homes."

Someone has to build them.

The labor force, infrastructure, capital and supply chains must be capable of doing it.

The Interest-Rate Shock

By 2022 inflation had become a national economic problem.

The Federal Reserve responded by sharply raising interest rates.

Mortgage rates followed.

The shift was extraordinary.

A buyer accustomed to seeing mortgage rates near 3 percent was suddenly facing rates around 6, 7 or even 8 percent.

Ordinarily, rising interest rates reduce housing prices.

Higher borrowing costs reduce demand.

Sellers eventually lower prices.

But something unusual happened this time.

Millions of homeowners had refinanced or purchased homes during the ultra-low-rate period.

They were sitting on mortgages around 2.5, 3 or 4 percent.

Selling their homes would mean giving up those mortgages and purchasing another home at a much higher rate.

So they stayed put.

This became known as the mortgage-rate lock-in effect.

Freddie Mac has identified this lock-in phenomenon as an important constraint on existing-home inventory.

It created a paradox.

Higher interest rates reduced buyer demand.

But they also reduced seller supply.

Prices therefore proved far more resistant than many analysts expected.

The market froze instead of collapsing.

Why We Did Not Get Another 2008 Housing Crash

Whenever housing becomes unaffordable, people naturally begin predicting another 2008.

But today's market is structurally different.

The 2008 crisis involved widespread speculative construction, extremely risky mortgages, weak underwriting, adjustable-rate loans, mortgage fraud, excessive leverage and homeowners with little or no equity.

When prices fell, millions of borrowers owed more than their houses were worth.

Foreclosures flooded the market.

Today's typical homeowner is generally in a very different financial position.

Many purchased years ago.

Many have substantial equity.

Many have fixed-rate mortgages at historically favorable rates.

They have little incentive to sell.

That reduces distressed inventory.

Housing prices can certainly decline—and some local markets have already experienced corrections—but a national 2008-style collapse generally requires large numbers of forced sellers.

So far, that mechanism has been largely absent.

What About Wall Street Buying Houses?

Institutional investors have become a favorite explanation for rising housing prices.

There is some truth to the concern—but the national picture is more complicated than social media often suggests.

After the Great Recession, large investors purchased thousands of foreclosed single-family homes, particularly in Sun Belt markets.

Those properties were converted into rentals.

Institutional ownership subsequently expanded.

GAO research found evidence that institutional investment may contribute to higher home prices and rents in some communities, although the magnitude is difficult to isolate from other housing-market factors.

Yet institutional investors do not own anything close to the majority of American houses.

GAO's 2026 examination of six metropolitan areas found institutional investors owned roughly 1 to 3 percent of all single-family homes in those markets, although their share of single-family rental properties could be considerably higher.

National estimates cited by GAO put institutional ownership around 3 percent of single-family homes.

That means Wall Street investors can absolutely influence specific neighborhoods and metropolitan areas, particularly where their purchases are concentrated.

But they cannot explain America's nationwide housing shortage by themselves.

The larger problem remains insufficient supply relative to demand.

Short-Term Rentals Changed Some Local Markets

Another investor-related factor is the rise of short-term rental platforms.

Properties that might once have housed year-round residents can sometimes generate significantly more revenue as vacation rentals.

In tourist destinations, beach communities, ski towns and historic downtown areas, this creates competition between:

• Local residents.
• Second-home buyers.
• Investors.
• Vacation-rental operators.

The effect varies enormously by location.

In many suburban communities it is negligible.

In a small vacation town it can be substantial.

Again, housing problems are often local.

A national statistic can conceal severe pressure in individual communities.

Demographics Matter

Housing demand has also been affected by population demographics.

Millennials represent one of America's largest generations.

For years they were stereotyped as a generation that didn't want houses.

In reality, many simply reached traditional homebuying age later.

Student debt, delayed marriage, Great Recession-era employment problems and high urban housing costs postponed household formation for many.

Eventually they began marrying, having children and attempting to purchase houses.

That placed a huge generation of potential buyers into a market that already suffered from limited starter-home inventory.

At the other end of the spectrum, older Americans are also remaining in their houses longer.

A house that once might have returned to the market when its owners retired may stay occupied for another decade or two.

Americans live longer.

Many prefer aging in place.

Low mortgage rates make staying financially attractive.

All of this reduces turnover.

Property Taxes Add to the Affordability Problem

The purchase price isn't the only expense that matters.

A homebuyer ultimately cares about the monthly payment.

That means taxes matter enormously.

In high-property-tax states and municipalities, a seemingly affordable mortgage can become unaffordable after taxes are included.

A buyer might qualify for the loan itself but struggle when another $800, $1,000 or $1,500 per month is added for property taxes.

Local governments face their own pressures.

• Schools.
• Police.
• Fire departments.
• Roads.
• Pensions.
• Public employees.
• Infrastructure.

Those services require revenue.

But rising property taxes effectively increase the ongoing cost of homeownership even for homeowners whose mortgages remain unchanged.

Homeowners Insurance Is Becoming a Major Issue

Insurance is increasingly important as well.

Homes have become more expensive to rebuild.

Construction labor costs more.

Materials cost more.

Natural-disaster losses have increased in certain regions.

Hurricanes, wildfires, flooding, hail and severe storms can generate billions of dollars in claims.

Insurance companies respond by increasing premiums, restricting coverage or leaving certain markets.

That is especially visible in states such as Florida and California, but the issue is spreading.

This creates another affordability problem that home-price statistics often miss.

Someone may purchase the exact same house at the exact same mortgage rate and still see the monthly cost rise dramatically because insurance doubles.

Existing Homeowners and First-Time Buyers Are Living in Different Markets

Today's housing economy increasingly resembles two separate markets.

The first consists of established homeowners.

Many have:

• Significant equity.
• Low fixed mortgage rates.
• Homes purchased before the recent price surge.

They have benefited enormously from appreciation.

During just the first two years of the pandemic, Federal Reserve researchers estimated that rapidly increasing house prices created approximately $9 trillion in owner-occupied housing wealth.

Then there is the second market:

People trying to buy their first home.

They face:

• Higher prices.
• Higher interest rates.
• Larger required down payments.
• Higher property taxes.
• Higher insurance costs.
• Competition for limited starter homes.

That creates a growing generational divide.

People who entered the market before prices exploded frequently gained enormous wealth.

Those trying to enter afterward must pay dramatically more for the same asset.

Could Building More Housing Actually Lower Prices?

Over the long run, greater supply is one of the most important tools available.

Housing follows basic economic principles.

If 20 families compete for five houses, prices rise.

If 20 families compete for 25 houses, buyers gain negotiating power.

But construction takes time.

Land must be acquired.

Projects must be financed.

Zoning approvals must be obtained.

Infrastructure may need expansion.

Workers must be hired.

Homes must physically be constructed.

That means America's housing shortage cannot realistically be solved overnight.

Even today's construction pace illustrates the challenge.

In June 2026, total housing starts were running at an annualized rate of approximately 1.427 million units, while single-family starts were approximately 895,000.

That construction must simultaneously replace obsolete housing, accommodate population and household growth, and begin addressing the accumulated shortage.

Closing a deficit measured in millions therefore takes years.

The Good News: The Market Is Slowly Becoming More Balanced

The current environment is difficult, but there are reasons for buyers to be somewhat encouraged.

Inventory has improved.

Existing-home supply reached about 4.6 months in June 2026.

Builders have become more aggressive.

In some markets, new homes are selling for less than existing homes.

Price growth nationally has slowed dramatically compared with the pandemic years.

FHFA reported national home-price appreciation of only 1.8 percent between the fourth quarter of 2024 and fourth quarter of 2025, with some states experiencing outright declines.

That represents something closer to normalization.

The challenge is mortgage rates.

If rates eventually decline without triggering another massive surge in demand, affordability could gradually improve.

But buyers should be careful assuming that a return to 3 percent mortgages is inevitable.

Those rates were historically exceptional.

How Buyers Can Save Money in Today's Housing Market

For buyers who decide to enter the market anyway, strategy matters far more today than it did when money was nearly free.

Shop the Mortgage—not just the house

Many buyers negotiate aggressively over $5,000 on the purchase price and then accept the first mortgage offered to them.

That can be backwards.

A small difference in interest rate can affect the buyer for decades.

Obtain quotes from multiple lenders.

Compare:

• Interest rate.
• APR.
• Origination fees.
• Discount points.
• Underwriting fees.
• Mortgage insurance.
• Closing costs.

Do not simply compare the advertised monthly payment.

Improve your credit before applying

Mortgage pricing is heavily influenced by borrower risk.

A stronger credit profile can translate into a lower interest rate.

Before shopping:

• Pay down revolving balances.
• Avoid opening unnecessary credit accounts.
• Check credit reports for errors.
• Continue paying every obligation on time.

Someone who improves their credit before applying may save far more over 30 years than they could negotiate off the purchase price.

Consider a larger down payment—but don't empty your savings

Putting more money down can lower the mortgage balance and potentially eliminate private mortgage insurance.

But purchasing a house while leaving yourself with $500 in the bank is dangerous.

Homes break.

Roofs leak.

Water heaters fail.

Cars need repairs.

Jobs disappear.

A homeowner needs reserves.

The financially strongest buyer is not necessarily the one who produces the largest possible down payment.

It is the buyer who can close the transaction and still maintain an emergency fund.

Look seriously at FHA financing

FHA loans can allow qualified borrowers to purchase with as little as 3.5 percent down.

They can be particularly useful for buyers with limited savings or less-than-perfect credit.

However, FHA borrowers generally pay mortgage-insurance premiums, so buyers should compare the full long-term cost against conventional financing.

Veterans should understand the VA loan benefit

For eligible veterans and servicemembers, the VA home loan remains one of the strongest mortgage benefits available.

VA does not require a down payment in many circumstances, does not require private mortgage insurance, limits certain closing costs and typically provides competitive rates.

Veterans should therefore be extremely cautious about automatically accepting a conventional or FHA mortgage without first comparing it against VA financing.

A buyer with VA eligibility may be leaving thousands of dollars on the table.

Ask about seller concessions

A seller does not always need to reduce the purchase price to give the buyer value.

A seller may instead contribute toward:

• Closing costs.
• Mortgage-rate buydowns.
• Repairs.
• Prepaid taxes.
• Other permitted expenses.

Reducing upfront expenses may sometimes benefit a cash-constrained buyer more than reducing the sale price by the same amount.

Investigate builder incentives

New-home builders frequently have something individual homeowners do not:

Access to affiliated mortgage companies and financing incentives.

Builders may offer:

• Temporary rate buydowns.
• Permanent interest-rate reductions.
• Closing-cost assistance.
• Upgrade credits.
• Price reductions.

A resale home listed for $390,000 may therefore actually cost more monthly than a $410,000 new home with an aggressively subsidized mortgage rate.

Compare the entire financial package.

Consider the ugly house

Cosmetic appearance can create opportunity.

Many buyers want turnkey homes.

That means homes with outdated kitchens, old carpet, ugly paint or dated bathrooms may receive less competition.

There is an important distinction, however, between cosmetic problems and structural problems.

Paint is cheap.

Foundation repairs are not.

A dated kitchen can wait.

A failing septic system cannot.

Buyers willing to tolerate cosmetic imperfection can sometimes avoid bidding wars without taking on catastrophic renovation risk.

Expand the search radius

Location is often the most expensive component of housing.

Moving 10 or 20 miles can sometimes reduce prices dramatically.

Remote and hybrid work have made this more practical for some households.

But calculate the tradeoff carefully.

A cheaper house accompanied by an expensive 90-minute commute may not actually save money after fuel, tolls, vehicle depreciation and lost time are considered.

Buy less house than the bank says you can afford

Mortgage approval is not a spending recommendation.

A lender may approve a borrower for a payment that technically fits underwriting ratios but leaves almost no room for:

• Retirement savings.
• Vacations.
• Childcare.
• Vehicles.
• Medical expenses.
• Emergencies.
• Home repairs.

A house should support your life.

Your life should not exist solely to support the house.

Do not waive inspections simply to win

One of the worst habits of the pandemic housing boom was buyers waiving inspections to make offers more attractive.

That can convert a seemingly affordable purchase into a financial disaster.

A house may hide:

• Foundation problems.
• Termite damage.
• Mold.
• Electrical hazards.
• Roof failure.
• Drainage problems.
• Septic issues.
• Structural defects.

Saving $10,000 on a negotiation means very little if the buyer inherits a $40,000 repair.

Understand the true monthly payment

Never evaluate affordability using only principal and interest.

Include:

• Property taxes.
• Homeowners insurance.
• Flood insurance where required.
• Mortgage insurance.
• HOA dues.
• Utilities.
• Maintenance.
• Expected repairs.

A useful traditional rule of thumb is to budget roughly 1 percent of a home's value annually for maintenance, although actual expenses vary considerably by the property's age and condition.

An older house may require significantly more.

Do not assume refinancing will save you later

One of the most dangerous sales pitches in a high-rate environment is:

"Buy now and refinance when rates fall."

Maybe they will.

Maybe they won't.

A buyer should purchase only if the mortgage is affordable at today's rate.

If rates decline later, refinancing becomes a bonus.

It should not be necessary for the household's survival.

The Larger Problem

America's housing affordability crisis cannot be solved by one interest-rate cut.

It cannot be solved simply by banning institutional investors.

It cannot be solved solely through government subsidies.

It cannot be solved by eliminating every building regulation.

And it cannot be solved by blaming millennials, Baby Boomers, developers, landlords or people moving from cities.

The crisis is the product of many forces overlapping:

• Years of underbuilding.
• Restrictive zoning.
• Expensive land.
• A shortage of starter homes.
• Construction labor shortages.
• Higher material costs.
• Pandemic migration.
• Historically cheap mortgage money followed by dramatically higher rates.
• Investor demand in certain markets.
• Short-term rentals in tourist communities.
• Rising taxes.
• Increasing insurance costs.
• Demographic pressure.
• And millions of homeowners who now have little financial incentive to sell.

In other words, America spent more than a decade creating a housing shortage and then experienced one of the most unusual economic shocks in modern history.

There was never going to be a quick fix.

The American Dream Isn't Dead—but the Entry Price Has Changed

Homeownership remains one of America's most powerful wealth-building mechanisms.

That is precisely why the affordability crisis matters so much.

When younger or working-class Americans cannot purchase homes, they are not merely missing an opportunity to have a backyard.

They may be missing decades of equity accumulation.

A homeowner paying down a mortgage for 30 years can eventually possess an asset worth hundreds of thousands of dollars.

A lifelong renter may reach retirement still needing to make a monthly housing payment.

That difference can echo across generations.

America understood this after World War II.

The country deliberately created mechanisms that allowed millions of ordinary families—including millions of returning veterans—to become homeowners.

The GI Bill helped finance millions of homes. FHA expanded access to long-term mortgages. Residential construction exploded. Homeownership grew from 43.6 percent in 1940 to more than 60 percent by 1960.

Those policies were imperfect and their benefits were not distributed equally.

But the fundamental idea was powerful:

Housing was one of those assets.

The challenge for modern America is figuring out how to make that opportunity attainable again without recreating the reckless lending and speculative excesses that produced the 2008 financial crisis.

That will require more housing.

More housing types.

Faster and smarter permitting.

Infrastructure investment.

Responsible lending.

Better use of programs like VA and FHA loans.

More realistic local zoning.

And perhaps most importantly, recognition that housing policy involves a fundamental tradeoff that communities have avoided confronting for decades.

Everyone wants their own home to increase in value.

Everyone also wants the next generation to be able to afford one.

Those goals cannot indefinitely move in the same direction.

At some point, America has to decide whether housing is primarily going to function as an increasingly scarce investment asset—or remain something ordinary working families have a realistic chance of owning.

For the generation standing outside the market looking in, that decision may determine whether the greatest wealth-building engine of the American middle class remains available to them at all.

Sources and Further Reading

• Federal Reserve: Changes in U.S. Family Finances from 2019 to 2022
• U.S. Census Bureau: Historical Homeownership Rates
• HUD: Federal Housing Administration History
• National Archives: Servicemen's Readjustment Act of 1944
• Department of Veterans Affairs: VA Home Loan History
• National Association of Realtors: Existing-Home Sales
• Federal Reserve Bank of St. Louis: Existing-Home Months' Supply
• U.S. Census Bureau: New Residential Sales
• Freddie Mac: Primary Mortgage Market Survey
• Freddie Mac: Housing Supply Still Undersupplied
• HUD User: Land-Use Regulation and Housing Supply
• HUD User: Regulatory Barriers and Housing Costs
• Freddie Mac: Mortgage and Refinance Trends
• Federal Reserve: COVID-19 Housing and Economic Conditions
• Bureau of Labor Statistics: Construction Input Prices
• Freddie Mac: Mortgage-Rate Lock-In and Housing Outlook
• U.S. GAO: Institutional Investors and Single-Family Housing
• U.S. GAO: Institutional Investment in Selected Metropolitan Housing Markets
• U.S. GAO: Institutional Investor Ownership Trends
• Federal Reserve: House Price Growth and Inflation During COVID-19
• U.S. Census Bureau: New Residential Construction
• Federal Housing Finance Agency: U.S. House Price Index
• HUD: FHA Loan Programs
• Department of Veterans Affairs: VA Home Loan Benefit