Can the US climb out of its ‘unprecedented’ housing crisis?

A young family in Grand Rapids, Michigan, has been looking for a larger house for three years, losing countless bidding wars. In Portland, Maine, a 29-year-old data analyst has been anxious to get out of their rental for a year, but hasn’t found a home to buy.

The story of the 2024 housing market has been one of a nation frozen in place, with millions of people unable to move amid rising home prices, stubbornly high mortgage rates and a drastic shortage of inventory. The year is on track to have the slowest housing market in three decades, with a projected four million home sales, according to the National Association of Realtors — making 2024 the second straight year of historically anemic sales. The last time sales dipped that low was in 1995, when the U.S. population was 22% smaller than it is today.

“This is just an incredibly low figure considering how many people we have in America, and Americans’ general view that as their situation improves, they move,” said Lawrence Yun, NAR’s chief economist. “I simply don’t think that you can remain at this low level.”

The depths of the housing slump surprised even economists, who had predicted that by spring, mortgage rates would fall enough to pull sales out of last year’s doldrums. Instead, inflation remained stubborn, driving up interest rates. By April, the average rate on a 30-year mortgage had topped 7%, stalling sales during what should have been peak shopping season. Buyers simply couldn’t afford what was available, while sellers, reluctant to trade historically low pandemic-era mortgages for much higher ones, had little incentive to list their homes. Despite the lack of activity, prices kept rising because there were so few homes available.

This housing crisis is largely a supply crisis, and not just because people aren’t selling their homes. The country simply hasn’t built enough new homes to keep pace with a growing population: Zillow puts the shortage at 4.5 million homes, Freddie Mac at 3.7 million. Builders have been struggling against higher costs for borrowing, materials and labor — relics of the pandemic. In October, new housing starts for single-family homes dropped by 6.9% from September, to 970,000, according to the Census Bureau.

Americans are now living in the aftermath of a historic run-up in home prices and rents amid this crushing housing deficit. In the third quarter of 2024, the median sale price for a house, $420,400, was 32% higher than in the second quarter of 2020, at the start of the pandemic, according to federal housing data. And the nationwide median rent, at $1,382 a month in November, was 20% higher than in January 2020, according to Apartment List. In 2022, more Americans than ever were rent-burdened (meaning they spent more than a third of their income on housing), and homelessness reached record highs.

“I’ve been working on this issue for three decades, and I’ve never seen the crisis this deep or this broad,” said Shaun Donovan, the chief executive of Enterprise Community Partners, a housing nonprofit, and a former secretary of housing and urban development under President Barack Obama. “The depth of the crisis is unprecedented.”

The high interest rates aren’t helping. Between July 2023 and June 2024, first-time homebuyers purchased less than a quarter of the homes that sold, the lowest share since 1981. And the ones who did buy were older than ever, with a median age of 38, NAR found. In the 1980s, first-time buyers were generally in their late 20s, according to NAR.

Today, people like Emily Jetmore, 29, a data analyst in Portland, Maine, are priced out. A year spent shopping for a $300,000 home has proved fruitless, and they are still paying $1,450 a month for a cramped apartment that faces a brick wall.

“I did want to be able to have my own space, and renting just feels increasingly like I have no control over where I live,” Jetmore said. “I feel trapped.”

An era of cheap debt that began in the wake of the 2008 foreclosure crisis came to a thunderous end in 2022, when the Federal Reserve began raising interest rates to tamp down inflation. The days of 3.5% mortgage rates are over. Realtor.com is predicting that mortgage rates will hover around 6.3% through next year, while Redfin expects them to stay closer to 7%, keeping many prospective buyers on the sidelines.

With buyers, sellers and renters all stuck, the forecast for 2025 remains uncertain. Some economists are hopeful that new inventory could create some momentum, while others are doubtful that the logjam will be broken. Redfin, expecting that demand will continue to outpace supply, predicts prices will rise by 4% next year, while CoreLogic, expecting that high interest rates will deter more buyers, forecasts a more modest 1.9% growth.

Sam Khater, chief economist at Freddie Mac, projects that prices will rise faster than they did in 2024, but sales will still increase as buyers come to terms with how far their dollars will go. “Homebuyers will adjust what they’re looking for,” he said.

There is some optimism on the inventory front. The National Association of Home Builders is expecting construction to start on about 1 million single-family homes next year. And there’s been a construction boom in the rental market from projects that began during the pandemic, with 1 million new multifamily units coming to market in 2024 and 2025, a 50-year high. This influx means that rents could at least remain flat in 2025, as they did in 2024.

In August, new rules went into effect governing how real estate agents are paid, and although the changes have not affected commissions so far, Redfin predicts that broker fees might dip slightly next year, particularly in the luxury market, potentially reducing one of the costs associated with selling a house.

Several states and cities have passed legislation to spur residential development, which is critical because most building rules are set at the local level. President-elect Donald Trump has called for loosening regulations, which could make it easier to build, and for opening federal land to housing construction.

“President Trump understands that his voters were voting on housing, at least in part,” Donovan said. “If he is going to follow through on his promises around inflation and costs and around housing specifically, he is going to have to deliver.”

But the second Trump administration might create its own headwinds. Trade tariffs could increase the costs of some building materials, like Canadian lumber, and spur inflation, driving up interest rates again. Mass deportations could increase labor costs, since an estimated 30% of construction workers are immigrants. And if federally backed Fannie Mae and Freddie Mac, the mortgage giants that guarantee most home loans, are privatized — a move Trump proposed during his first term — mortgage rates could rise.

“People hoping for a huge housing boom and house prices coming down, rents coming down — it’s hard to see how that would happen in a Trump administration,” said Dean Baker, a senior economist at the Center for Economic and Policy Research, a nonpartisan think tank.

Couples like Will Wicks and Allison Treman say the market is dictating how they’re able to live their lives. Treman, 40, is a founder of a tech startup, and Wicks, 42, is a stay-at-home parent to the couple’s two young children. Three years ago, when interest rates were low, they figured it was time to trade up from their small four-bedroom house to a larger one with more land in the Grand Rapids area. Then came the bidding wars, including one with more than 30 offers. Wicks lost track of how many they lost.

These days, the market for a $500,000 home is only slightly less competitive — but the couple still lose out every time, even though they regularly offer around 10% over list price. As the children grow from toddlers to school age, Wicks wonders whether they’ll ever be able to move.

“It definitely feels like we have hit a roadblock,” he said, adding: “Man, this is not where I thought things were going to go.”

This article originally appeared in The New York Times.

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