The US housing market is breaking records, but not in ways that inspire celebration. The national median home price recently crossed $400,000—a figure that underscores how unaffordable housing has become for millions of Americans. Despite fluctuating demand due to rising mortgage rates, limited inventory and increased competition have kept prices stubbornly high.
Mortgage rates, now above 7% for a 30-year fixed loan, are the highest they’ve been in over two decades. For context, monthly payments on a median-priced home now average $2,600—nearly 50% higher than just two years ago. First-time buyers, who typically rely on financing, are feeling the squeeze, while wealthier investors and cash buyers dominate the market.
Why is this happening? The housing crisis is fueled by a combination of factors. On the supply side, construction of new homes has slowed due to labor shortages, material costs, and zoning restrictions. On the demand side, homeowners with ultra-low mortgage rates are reluctant to sell, further tightening the market. As a result, inventory remains near historic lows, even as interest rate hikes cool some buyer enthusiasm.
The bigger picture: Housing affordability is now at its worst point since the mid-1980s, according to economists. This “locked-in” market, where current homeowners hold onto their properties due to favorable rates, has created a cycle that limits mobility and economic growth. Younger generations, in particular, are increasingly unable to achieve the dream of homeownership, further widening wealth gaps.
What’s next? While some experts predict that higher mortgage rates will eventually lead to a market correction, others argue that systemic issues, such as restrictive zoning laws and underinvestment in affordable housing, need to be addressed. Without intervention, the current trends could create long-term economic stagnation and exacerbate social inequality.