The U.S. housing market is paralyzed, with buyers pulling back and builders becoming more pessimistic as the midterm elections approach.
Adding to the tension: Mortgage rates have risen above 7% in recent weeks, hitting a three-year high of 7.4% last month. The average 30-year fixed rate fell slightly to 7.24% last week, according to Freddie Mac.
America’s housing problems run deep. Residential construction has not kept pace with demand since the 2008 financial crash decimated the nation’s real estate sector. High mortgage rates have also driven up buyers’ monthly payments, while home prices continue to climb each month to record levels.
In the third quarter, the average household needs to earn $115,600 in income to be able to afford the usual cost of housing – 75% more than the $66,200 required five years ago, according to Oxford Economics.
This has resulted in the number of homes trading near a 30-year low over the past three years.
President Donald Trump won the 2024 election amid growing frustration with the cost of living. Two years later, affordability remains a defining issue heading into the midterm elections, as Americans continue to struggle with high prices for housing, groceries, gasoline and other necessities.
But while the White House has taken some steps toward making housing affordable during Trump’s second term, largely through executive orders, the issue has received relatively little attention in the administration’s public messaging over the past two years.
Trump, who was a real estate developer for decades, said during the 2024 election campaign that his plan to tackle the cost of housing would rely primarily on lowering interest rates.
He doubled down on that promise this year.
“People who own their homes, we’re going to keep them rich. We’re going to keep those prices high. We’re not going to destroy the value of their homes,” Trump said at a cabinet meeting earlier this year. “We’re going to make it easier to buy. We’re going to lower interest rates.”
For a brief moment, mortgage rates looked like they were about to fall. In January, Trump ordered Fannie Mae and Freddie Mac, the government-sponsored enterprises that back much of the U.S. mortgage market, to buy $200 billion of mortgage-backed securities in an effort to drive down rates.
Rates fell earlier in the year, falling below 6% in February for the first time since 2022, when the Federal Reserve began its fight against post-pandemic inflation, sparking hopes that cheaper borrowing would ease the housing affordability crisis.
But the respite was short-lived. Mortgage rates rose again after the start of the U.S.-Iran war, and have remained high since.
Mortgage rates are tied to the 10-year Treasury yield, which moves with investors’ expectations for inflation, economic growth and the Fed’s interest rate policy. In recent months, the bond market has been hit by new inflation fears, an oil shock linked to the Iranian conflict, rising federal deficits and a sharp rise in investment in AI.
And early signs indicate that bond market turmoil will add to the housing market’s woes.
Pending home sales fell to a record low in September, based on data going back to 2001, according to the National Association of Realtors. New home construction also fell to a four-month low, according to Census Bureau data, as high borrowing costs continue to weigh on the market.
The gloom extends to builders, too: Homebuilder sentiment, a measure of the industry’s confidence in the housing market, fell to a 14-year low in September, according to the latest survey from the National Association of Home Builders.
Overall, it will take a long time to resolve the problems in the real estate market.
But some bright spots remain: Rents have stabilized nationally in recent years, said Yonah Freemark, senior research associate in the Urban Institute’s housing and communities division. This is due in part to increased multifamily apartment construction between 2020 and 2024, which helped ease demand pressures, he added.
Overall, the federal government may not have much power to influence the housing market’s supply side because zoning and permitting decisions are made by local and state governments, said Daryl Fairweather, Redfin’s chief economist.
“In places that have been builder-friendly and allowed supply to meet demand, we’ve seen prices fall and affordability improve,” Fairweather said, citing as an example Austin, Texas, which saw housing prices fall from their peak in 2022. The city increased its housing stock by about 30% between 2015 and 2024, according to Pew.
Last month, Trump signed an executive order that directs federal agencies to ease the burden of mortgage insurance and refinancing costs, among other measures.
“President Trump has focused on the need to make housing more affordable,” said White House spokesman Davis Ingle. “The President won’t stop fighting until the American Dream of homeownership is within reach of every American. That’s why he continues to sign bold new executive orders and calls on Congress to pass new laws.”
But the White House tariff plan has raised the cost of building housing, according to the NAHB — and evictions have slowed housing construction projects in many areas that rely on an immigrant construction workforce.
Some White House proposals to improve housing affordability never came to fruition, such as a 50-year mortgage or the possibility of making mortgages portable, which would allow homeowners with lower rates to transfer their existing loan to a new property when they move.
Most housing initiatives have also been managed by decree rather than by legislation.
The one exception was the ROAD to Housing Act, which Congress passed this summer with broad bipartisan support. The bill included measures to increase housing supply and a provision to limit purchases of single-family homes by large investors, which codified into law one of Trump’s executive orders.
However, Trump allowed the measure to become law without his signature, rather than signing or vetoing it. At the time, Trump called the housing bill a “big yawn” and “minor.”
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