US Housing Market Remains Defined by High Prices, Tight Supply, and Affordability Pressure cover art

US Housing Market Remains Defined by High Prices, Tight Supply, and Affordability Pressure

US Housing Market Remains Defined by High Prices, Tight Supply, and Affordability Pressure

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 The US housing market this week remains defined by high prices, tight supply, and intense affordability pressure, even as expectations for slightly lower borrowing costs begin to take shape.

National data released in the past few days underscore the affordability crunch. A new analysis cited by CBS News and Bankrate finds that more than 75 percent of homes across the US are now unaffordable for the typical household, given current incomes, prices, and mortgage rates.[3] Only 24 percent of home sales last year went to first time buyers, down sharply from about 50 percent in 2010, highlighting how younger and lower income households are being locked out of ownership.[3] Zillow estimates the country is short about 4.7 million housing units, a supply gap that continues to underpin pricing.[3]

At the same time, the Federal Reserve’s projections released after its December meeting show officials expecting only gradual easing in financial conditions.[5] Realtor.com now forecasts average mortgage rates of roughly 6.6 percent in 2025, dipping to about 6.3 percent in 2026.[3] That is down from the recent peak above 7 percent, but still far above the ultra low rates of the late 2010s, limiting relief for buyers.

Regional patterns are diverging. Recent commentary notes that parts of the South and West, helped by looser permitting and tax incentives, are seeing more new construction and slightly better inventory, while the Northeast and Midwest remain well below pre pandemic building levels.[3] Local market snapshots, such as Wheaton, Illinois, show how constrained supply translates into a strong sellers market: roughly a one month inventory, homes going under contract in about one to two weeks, and median sale prices jumping month over month while closing at or above list price.[1]

Industry leaders and policymakers are testing new responses. Analysts are actively debating extended term products such as a 50 year mortgage as a potential, though controversial, tool to stretch affordability under today’s high price regime.[6] Builders continue to focus on smaller, more standardized homes in fast growing Sun Belt metros, while public agencies push zoning reforms and incentives to accelerate multifamily and starter home development. Compared with reports earlier this year, the core dynamic is unchanged: demand remains solid, supply is structurally short, prices high, and any easing in rates is expected to improve activity only gradually, not reset valuations.

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