The U.S. housing market continues to face uncertainty and record-high
unaffordability as home prices and interest rates push sales to their lowest
level in 30 years, according to The State of the Nation’s Housing 2025, a
report published by the Harvard Joint Center for Housing Studies (JCHS).
The report highlights the record-high number of cost-burdened renters
(those spending more than 30% of their income on housing and utilities),
the staggering increase in cost-burdened homeowners, and the pricing
challenges faced by first-time home buyers.
While rents are increasing nationwide, rental demand still remains strong.
With fewer households able to afford to buy a home, the renting population
grew by 848,000 in 2024, absorbing the new 608,000 multifamily units
completed last year — the most developed in nearly four decades. Further
exacerbating the issue, the number of higher-rent units has increased
while the number of lower-rent units has decreased.
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The number of cost-burdened homeowners also rose by 646,000 to 20.3
million, representing 24% of home-owning households. Cost burdens can
partially be attributed to insurance premium and property tax increases.
The rise of climate-related disasters has caused private insurers to raise
premiums, reduce coverage, and in some cases, pull out of markets
completely.
But soaring home prices are still the main driver of the housing affordability
crisis. Over the last six years, home prices have risen 60%. Accordingly,
the median existing single-family home price hit a record-high $412,500 in
2024, costing a home buyer five times the median household income,
which is significantly higher than the price-to-income ratio traditionally
considered “affordable.”
Solutions to the Crisis
Builders have responded to these issues with smaller homes and
mortgage rate buydowns, and while the new homeownership rate
continues to fall and existing home sales hit a 30-year low, new home
sales increased by 3% last year.
The JCHS report notes that increasing housing supply would help alleviate
the crisis. Zoning reforms and revisiting land-use policies can be used at
the local level. Zoning reforms, financing tools and design assistance can
also enable the construction of more modestly priced “missing middle”
housing types such as accessory dwelling units and small multifamily
buildings.
In a live discussion following the release of the report, panelists listed
offsite construction, repurposing existing buildings, and creative public
land use as innovative ways to reduce building costs.
“The crisis is the mother of invention,” Executive Director of
Massachusetts Housing Partnership Clark Ziegler said. “Even though it’s a
dark time, it’s a time when there’s a lot of creativity flourishing.”
With home builders and state and local lawmakers attempting to find ways
to mitigate this ongoing housing affordability crisis, the report cites newly
imposed tariffs, reduced immigration and diminished federal support as
massive hurdles for the industry. It is estimated that tariffs on construction
materials will increase the price of a new home by $10,900, and the
already thin labor pool is expected shrink, as approximately one-third of
construction workers are immigrants.
Home builders are facing other obstacles as well. The report cites a
January NAHB survey in which 91% of builders identified elevated interest
rates as an impediment to increased development. Other constraints
included rising inflation (80%), buyer affordability expectations (77%), and
the cost and availability of land (63%).
“There must be a concerted effort to do more to address the affordability
and supply crisis,” JCHS Managing Director Chris Herbert said in a press
release. “The potential consequences of inaction are simply too harmful to
the macroeconomy and the millions of households striving for a safe,
affordable place to call home.”