The U.S. housing market is grappling with significant challenges, particularly as affordability and availability of homes hit record lows. With the current climate showing about 30 renter households competing for every available home, it’s no surprise many Americans are increasingly concerned about their housing options.
Sourcing data from Freddie Mac’s recent market outlook, it's been shown how this supply crunch extends back to the Great Recession. Since the financial crisis, new home construction has slowly picked up, but it has not been enough to bridge the gap between supply and demand. Currently, there is a glaring shortage of at least 1.5 million homes, leaving first-time home buyers in dire straits.
According to Freddie Mac's economists, the imbalance means those trying to purchase their first home face not only steep prices but also the pressure of competing against numerous other hopeful buyers. This competition escalates as new data reveals entry-level prices have surged, outpacing high-end home price growth by 63% since January 2000. “Less affordable housing is acutely felt by those seeking to buy their first homes, especially those without substantial wealth at their disposal,” the report states.
Meanwhile, rising mortgage rates are compounding the woes of prospective buyers. After witnessing a slight decline, the current average rate for 30-year fixed mortgages has climbed to 6.54%, as reported by Freddie Mac. Such rates have significantly dampened the spirits of renters, as noted by LendingTree’s survey, which found more than half fear they’ll never achieve homeownership. Among those renters who aspire to own their home, the top barriers to entry remain the cost of down payments and the steep prices of homes, with 65% of respondents citing down payments as their primary concern.
Despite these hurdles, the desire for home ownership remains strong. A staggering 83% of Americans would prefer to own their home over renting, with many valuing the personal freedom and stability it brings over potential financial gains. Specifically, 62% want the flexibility to personalize their space, and 61% seek the stability of not having to renew their lease annually. Yet many must confront the harsh reality: renting remains cheaper than buying, particularly for starter homes, as indicated by reports.
With challenges for sellers also growing, the costs tied to selling homes have many feeling drained. A new survey from Clever Real Estate suggests American sellers spend upwards of $54,616 selling their homes, with 42% noting their total costs surpassed their expectations. Many express regret post-sale, often citing they felt rushed to sell. Interestingly, post-National Association of Realtors (NAR) settlement changes have led sellers to push for buyers to cover their agent fees, indicating shifting perceptions around real estate transactions.
Looking at state-specific data, housing affordability varies significantly, particularly across California, where the majority of households experiencing cost burdens are situated. Nationally, data shows roughly 31.3% of American households are financially strained, with renters bearing the brunt, as nearly half of renter households were classified as cost-burdened as recently as 2023.
Despite some improvement since the height of the COVID-19 pandemic, where the number of active listings slumped drastically, there are still fewer homes for sale now than there were five years ago. The year-on-year analysis from Realtor.com indicates the available listings have surged—34% higher than the previous year—but the overall volume is still fewer compared to pre-pandemic figures, where active listings stood at over 1.2 million.
Interestingly, the rise of the home equity boom during this time period suggests many homeowners are effectively leveraging their homes, with the Federal Housing Finance Agency reporting home prices rose 57.8% since July 2019.
Beyond regional snapshots, the broader trends highlight how rising costs and unfulfilled demand are pervasive across the U.S., making swift legislative changes necessary. Both candidates vying for the presidency, Democrat Kamala Harris and Republican Donald Trump, acknowledge the urgency of the issue, focusing on increasing the supply of affordable homes. Recent polling shows 69% of Americans are “very concerned” about housing costs—a staggering rise from prior years.
With such sentiments echoed broadly, the American dream of homeownership may stay out of reach longer for many households, especially as prospective buyers continue to navigate shifting sands of the housing market. Tools like the Realtor.com® rent versus buy calculator can help wrestle with these financial dilemmas, offering insights where renting could potentially make more financial sense than buying for many households.
So, as we look toward the future of the housing market, the narrative appears strained but not hopeless. Understanding the underlying statistics and the factors shaping this market remains key for both renters and potential buyers as it informs their choices moving forward.
