The American housing market provides an interesting snapshot of the current state of the U.S. economy. It is essentially split into two extremes: People who have equity from other properties and/or can pay cash for houses are at an all-time high; People with no equity and no cash (usually first-time home buyers) are at an all-time low. 

​

The median age of first-time homebuyers is now a record 40. In the 1980s, the average age hit somewhere in a person’s late 20s. The share of homebuyers with children under 18 has dropped to a historic low of just 24 percent, compared to 58 percent in 1985. First-time home buyers now make up just 21 percent of the market, the lowest percentage since the National Association of Realtors started tracking such things in 1981. That’s down from 40 percent before the 2007-2008 Financial Crises.

​

Without question, today’s housing market is the most difficult in four decades. Home prices have increased around 50 percent since 2020, far outpacing income growth. As of August 2026, the median existing-home sales price in the United States was $429,100. Home prices have also climbed to roughly five times the median household income, compared with about 3.2 times income throughout the 1990s. Meanwhile, down payments have risen to levels not seen in decades. The typical first-time buyer now puts down 10 percent – the highest share since 1989 – while repeat buyers put down 23 percent, the highest since 2003.

​

The median monthly price tag for homeowners with a mortgage increased to $2,035 in 2024, up from an inflation-adjusted $1,960 in 2023. Housing costs are consuming an increasingly large share of Americans’ incomes. A record 43.5 million households – 33 percent of all U.S. households – now spend more than 30 percent of their income on housing, while 21.6 million spend more than half.

​

This is creating a self-fulfilling prophesy: Around 15 percent of home-purchase agreements were canceled in September 2025 – up over 13 percent from the year before – because buyers got cold feet and/or realized the costs were going to be higher than they expected. The trend has persisted into 2026. In July, 14 percent of U.S. home-sale agreements fell through, the highest seasonally adjusted share in nearly three years.

​

Simply put, thanks to expensive home prices and new affordability challenges, including things like student loans, buying a home is beyond the reach of most American families. To make matters worse, insurance and property taxes together now cost more than many mortgages. Utility costs and homeowners’ association fees are also on the rise.

​

Some people think lower mortgage rates would magically solve the problem, but the evidence suggests that interest rates are only part of the affordability crisis. Mortgage rates fell at points in 2025 and early 2026 without restoring affordability for millions of would-be buyers, and rates have since climbed back to roughly 6.8 percent. And, the use of Federal Housing Administration (FHA) loans – which are designed in part to make homeownership more accessible to borrowers with smaller down payments and less-than-perfect credit – has declined sharply among first-time buyers. Among first-time buyers who financed their purchase, 55 percent used an FHA loan in 2009; by 2025, that figure had fallen to just 28 percent.

​

Much of the problem comes down to supply and demand. In 1972, when the U.S. population was roughly 210 million, approximately 2.36 million conventional housing units were started and another 575,000 mobile homes were shipped – nearly 2.93 million new units combined. More than half a century later, despite a population of over 340 million, only about 1.63 million privately owned housing units were completed in 2024, falling to around 1.5 million in 2025.

​

Insufficient construction isn’t the only thing constricting the housing market. Millions of existing homeowners are effectively “locked in” by cheap mortgages obtained before interest rates surged. The average rate on a 30-year fixed mortgage fell to an all-time low of just 2.65 percent in January 2021, and even by late 2025, one in five outstanding mortgages still carried a rate below 3 percent.

​

So, they don’t really want to sell their home just to turn around and sign a much more expensive mortgage… to the point where many people whose homes don’t sell quickly are taking them off the market instead of lowering the price. Delistings of homes increased 72 percent in August 2025 compared with the year before. The trend has continued into 2026. In April, 5.8 percent of all U.S. home listings were taken off the market, tied for the highest number since the pandemic brought the housing market to a sudden halt in March 2020.

​

Because this is a supply and demand problem, the answer seems simple: We just need more housing units, right? That’s true – but there are many challenges, side effects, and unintended consequences that come with that answer. Basically, we need anywhere from 1.5 million to 5.5 million more housing units depending on who you ask (Moody’s Analytics says 2 million; the Brookings Institution says 4.9 million), but even if it’s on the lower side, we need to pick up the pace.

​

This is way more challenging now, thanks to the Trump/Vance administration’s outrageous tariffs on many of the materials used in residential construction. Canadian softwood lumber provides a perfect example. In 2025, the United States raised duties on most Canadian softwood lumber to roughly 35 percent. Then, in October, the administration imposed an additional 10 percent tariff on imported softwood timber and lumber, pushing the combined tariff and duty number on much Canadian lumber to around 45 percent. This is a big deal because, although the United States produces enormous quantities of lumber domestically, it also relies heavily on imports to meet demand, with Canada by far the largest foreign supplier of softwood lumber.

​

Not to mention the Trump/Vance administration’s sky-high tariffs on steel, aluminum and copper. They raised Section 232 tariffs on imported steel and aluminum to 50 percent and, in August 2025, expanded those tariffs to 407 additional categories of products containing steel or aluminum. They also imposed a 50 percent tariff on semi-finished copper products and certain copper-intensive derivative products. In April 2026, the administration expanded its metals tariffs even more, applying tariffs to the full customs value of many covered steel, aluminum and copper products.

​

The administration’s immigration policies are also a major problem for the housing market. Regardless of your stance on immigration, the housing industry is heavily dependent on immigrant labor. Foreign-born workers account for over a quarter of the entire American construction workforce and roughly one-third of workers in the construction trades. They make up 57 percent of drywall and ceiling-tile installers, 53 percent of roofers, 53 percent of painters, 51 percent of carpet, floor and tile installers, 43 percent of construction laborers and 35 percent of carpenters.

​

The bottom line is that the industry is desperately short of workers. More than 200,000 construction jobs remain unfilled, and labor shortages prevented an estimated 19,000 homes from being built in 2024 alone. Those shortages also extended construction times for many builders by nearly two months and, according to the Home Builders Institute and National Association of Home Builders, impose roughly $10.8 billion a year in additional costs and lost housing production. You don’t have to be an economist to recognize that fewer available construction workers will likely mean longer building times, higher labor costs and fewer homes being completed – precisely when the country needs to dramatically increase housing production.

​

Setting aside these larger policy issues, we must implement a strategy that closes the housing gap. Since there is not a silver-bullet solution for this challenge, our strategy must do many things at once: encourage new construction; streamline local zoning and permitting; increase access to mortgages, including those for “small-home” loans; help unlock existing housing inventory; and modernize construction techniques to build more homes faster and more affordably.

​

Let’s take the last one first. On this, there are definitely ways we can start making headway. From May 1969 to the mid-1970s, the Department of Housing and Urban Development (HUD) implemented a plan called Operation Breakthrough, a 3-phase demonstration that tested innovative building materials and methods. The program was designed “to identify and demonstrate solutions to obstacles preventing large-scale housing production in the nation, with the goal of volume production of quality housing for all income groups.” The demonstration “sought housing system improvements, while at the same time, improved environmental quality and low-cost maintenance.”

​

At the time, George Romney, who was Secretary of HUD in the Nixon administration, reiterated that Operation Breakthrough was “not a program designed to see just how cheaply we can build a house, but was a way to break through to total new systems of housing production, financing, marketing, management, and land use.”

​

We should launch a modern-day Operation Breakthrough to harness the ingenious, creativity, and resourcefulness of Americans. In Phase One of the original program, for example, 22 “Housing System Producers” were chosen from over 200 competitors to visualize designs, create engineering blueprints, and develop and execute the construction of prototype housing units. The winners utilized housing models ranging from precast concrete- or wood-framed modules to units constructed from plastic or metal. Just imagine what those prototypes would look like today!

 

Regardless of the paths we take, we need to anticipate and minimize the unintended consequences that can come with them. For example, one of the most helpful things we can do to make homeownership more accessible to Americans is to make it easier for them to purchase the low-cost homes that already exist. More than one in five U.S. homes are still valued below $150,000.

​

Yet financing these properties has become increasingly difficult. Between 2004 and 2021, the number of mortgages issued for less than $150,000 plummeted nearly 70 percent, from 2.7 million to just 830,000 a year. And from 2018 through 2021, only 26 percent of homes selling for less than $150,000 were financed with a mortgage, compared with 71 percent of more expensive homes. That puts many affordable properties effectively out of reach for first-time and lower-income buyers who cannot make an all-cash offer.

​

One of the main reasons for this is that, after the 2007-2009 Financial Crisis – which was sparked by the original sin of people receiving home loans they couldn’t afford – provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act (the legislation that was passed to prevent these kind of crises in the future) made it far less profitable for most banks to work with smaller loans. While, on one hand, this is understandable given what the country had just been through, these rules disproportionally hurt community banks, the very ones that usually serve lower-income buyers.

​

To make this even more tricky, often these lower-cost homes do not qualify for loans even when they are available because the homes are often old and in poor condition. This is a double whammy because, not only can first-time homeowners not buy them, but entire neighborhoods begin to deteriorate and eventually become stagnant. When it gets to this point, the only people who can afford to risk turning these neighborhoods around are corporate investors, whose plans for development further shut out Middle Class Americans.

​​

An Urban Institute analysis found that in 2020, corporate buyers – including LLCs, partnerships and corporations – purchased 29.3 percent of homes selling for less than $100,000, compared with just 7 percent of homes selling for $100,000 or more. At the same time, only 35.4 percent of homes selling for less than $100,000 were financed with a mortgage, compared with 82.1 percent of more expensive homes.

​

Another example of a plan that has the potential for huge negative consequences is one like Kamala Harris, the 2024 Democratic nominee for president, proposed in the 2024 election. A key part of the plan was to provide first-time home buyers with $25,000 in down-payment assistance. The Harris campaign estimated that four million homebuyers would be eligible, and the nonpartisan Committee for a Responsible Federal Budget estimated that the program would cost around $100 billion over four years.

​

On the surface, this sounds like a nice thing to do for people. However, it would most certainly lead to higher home prices in the end because subsidizing buyers also increases their purchasing power… and we know that one of the most basic laws of supply and demand is that an increase in demand without a corresponding increase in supply will result in higher prices.

​

To be fair, Harris’s proposal did attempt to also address the supply side. Her plan called for facilitating the construction of three million additional homes over four years through measures that included tax incentives for builders of starter homes, an expansion of affordable-housing tax credits, a $40 billion housing innovation fund, efforts to reduce regulatory barriers, and the use of some federal land for housing.

​

But many of those ideas would require congressional approval or action by state and local governments, and important implementation details remained elusive. This matters A LOT because purchasing power can reach the market much faster than millions of new homes can be permitted, financed and built.