What Housing Recovery?

 The Mortgage Corner

“Existing-home sales increased by 1.7% month-over-month in February, according to the National Association of REALTORS® Existing-Home Sales report. The report provides the real estate ecosystem—including agents, homebuyers and sellers—with data on the level of home sales, price, and inventory.” NAR

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It’s been months since I last wrote about the housing market, and why it’s  had such a slow recovery. FRED’s 30-year fixed mortgage graph tells us why, which is the reason we have a housing shortage.

The 30-year average fixed rate mortgage was a level 3% until 2022 during the COVID-19 pandemic until the Fed raised interest rates to combat rising inflation. It’s 6.0% today, after dipping very briefly to 5.98% last month.

It's this high today because Trump’s Iran war is costing $1 billion per day on borrowed money due to his Big Beautiful Tax Bill, which will add to the current $39 trillion in federal debt.

Are we seeing a housing revival with the slight uptick in existing home sales? Hope springs eternal, as the saying goes. Sales have hovered around 4 million residential units since the busted housing bubble and 2008-09 Great Recession. There has never been enough to satisfy the demand since then, because the busted housing bubble restricted new home building for almost 10 years and 30-year fixed rate mortgages have hovered above 6% ever since, per the FRED graph.

But, “Housing affordability is improving, and consumers are responding,” said NAR Chief Economist Dr. Lawrence Yun. “Still, there is a long way to go to return to pre-pandemic levels of transaction activity. There are more than 6 million more jobs than in 2019, yet home sales per year are down by one million.”

There isn’t much of a housing supply inventory, and builders aren’t cooperating now with less than a four-month supply of existing home inventory on the market at the current slow sales rate.

This is while privately-owned housing starts in October were punk, at just a seasonally adjusted annual rate of 1,246,000. It is 4.6 percent below the revised September estimate of 1,306,000 and is 7.8 percent below the October 2024 rate of 1,352,000, says Calculated Risk.

Unaffordably high mortgage rates are one reason for the construction shortage, but Trump’s tariffs on building materials are also adding to construction costs.

Higher import taxes on steel, copper, lumber and other materials are lifting construction prices and interrupting some jobs. Immigration enforcement is worsening worker shortages and delaying projects.

“We get so many things thrown at us in the construction industry,” said Tony Rader, the chief relationship officer at National Roofing Partners, a commercial roofing company in Coppell, Texas. “It just seems like every time we turn around, we’ve got something else to fight.”

So, we must throw in the costs of empire building because Republicans are so fond of waging wars. It’s not only the Federal Reserve keeping rates high, but also the huge federal debt has been boosting bond yields. It is the reason we still have a housing shortage of 2-5 million units, depending on who you ask, since the Great Recession and housing bubble.

Harlan Green © 2025

Follow Harlan Green on: https://twitter.com/HarlanGreen

Housing Market Is Recovering

 The Mortgage Corner

WASHINGTON (October 23, 2025) – Existing-home sales increased by 1.5% month-over-month in September, according to the National Association of REALTORS® Existing-Home Sales Report. The Report provides the real estate ecosystem, including agents and homebuyers and sellers, with data on the level of home sales, price, and inventory.

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It’s about time. We are seeing a housing revival with existing home sales on a 7-month high for the first time since the 2008-09 Great Recession (wide gray band in FRED graph), as reported by the National Association of Realtors (NAR).

The housing market has been stuck in part because the Fed held off cutting interest rates until its September FOMC. The cut was just -0.25%, and two more rate cuts are expected this year.

That may start a more sustained housing recovery, as fixed mortgage rates are also beginning to decline despite rising inflation since April and Trump’s retaliatory tariffs. (Bond holders don’t like inflation because it reduces the value of bonds.)

"As anticipated, falling mortgage rates are lifting home sales," said NAR Chief Economist Dr. Lawrence Yun. "Improving housing affordability is also contributing to the increase in sales."

Affordability has improved because "Inventory is matching a five-year high, though it remains below pre-COVID levels," Yun added. "Many homeowners are financially comfortable, resulting in very few distressed properties and forced sales. Home prices continue to rise in most parts of the country, further contributing to overall household wealth."

The 30-year conforming fixed mortgage rate for best credit holders has dipped below 6% to about 5.875% for 0 pts. in closing costs, or 5.50% for a 1 pt. origination fee. The 15-year fixed rate is now 5.25% for 0 pts., and 4.875%, 1 pt. at this writing.

This year’s housing revival first showed up in a boost in new-home sales, according to the National Association of Homebuilders (NAHB). Sales of newly built single-family homes jumped 20.5% earlier in August, to a seasonally adjusted annual rate of 800,000 from an upwardly revised reading in July, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

Much of the new-home sales boost was due to a construction surge to as much as 1.9 million annual units after the COVID-19 pandemic, seasonally adjusted. That and record low interest rates during the pandemic caused bloated inventories that builders are attempting to reduce. So they are offering interest rate buydowns to reduce mortgage rates. It cuts into builders’ profits but adds little to the sales price.

Housing construction has declined since then, decreasing 8.5% in August to a seasonally adjusted annual rate of 1.31 million units and construction will probably remain lower until more buyers come into the housing market as mortgage rates decline further.

What about mortgage rates? That hasn’t stopped homebuyers before. The 30-year conforming fixed rate hovered between 7.5% to 5.0% from the beginning of the housing bubble in 2000 to 2010 when homebuyers went wild with subprime loans, until the Great Recession.

The moral of this tale is that homebuyers and lenders have always found a way to finance a purchase with an almost infinite variety of mortgage choices. But the U.S. population is beginning to shrink because of the immigration restrictions. Builders and governments must find more creative solutions to affordable housing to bring more young adults into the housing market.

Challenging affordability conditions have always created headwinds for the housing sector, but that never stopped those that wanted to own a residence during the era of double-digit interest rates in the 1980s and 90s.

The average 30-year conforming fixed rate mortgage didn’t drop below 10% until the 1990s and 7.5% until 2001.

I foresee lenders finding creative ways to finance more homebuyers in the coming years as well.

Harlan Green © 2025

Follow Harlan Green on: https://twitter.com/HarlanGreen

Why the Housing Shortage?

 The Mortgage Corner

How can we recover from our housing shortage that has resulted in record homelessness and a lack of affordability for many young households?

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There haven’t been enough homes built to satisfy prospective home buyers for a decade—from the end of the housing bubble until 2020, thanks to the oversupply generated during housing bubble and Great Recession, as can be seen in the FRED graph of housing construction dating from 2000 (large gray bar is the Great Recession).

Builders are still not building enough homes to keep up with population growth while builder confidence remains stagnant in the face of weaker homebuyer demand. August housing starts declined 8.5% month-over-month to a seasonally adjusted annual rate of 1.307 million units, according to the latest data released by the U.S. Census Bureau.

Builders had been constructing 1.6 to over 2 million new housing units until January 2006 at the height of the housing bubble because they thought they had prospective homebuyers with adequate incomes and credit that could afford the purchases.

But lax regulations and supervision during the GW Bush administration by the U.S. Treasury and Alan Greenspan’s Federal Reserve allowed for anyone to qualify to buy a home with so-called liar loans that had artificially low start rates. The housing bubble burst when Greenspan finally began to raise interest rates to combat the rising inflation, which caused a massive defaulting of the liar loans.

More than one million new households per year are still being formed but it wasn’t until 2013 that more than one million new units were being built again. And 8.7 million jobs were lost during the Great Recession, compounding the problem of affordability.

In a word, builders must build more affordable homes. At one time 40% of existing-home sales were entry-level, first-time homebuyers that could afford to buy a home. It’s just 28% in the latest sales report by the National Association of Realtors (NAR).

Existing-home sales remained essentially the same in August, ticking down by 0.2% from July, according to the National Association of REALTORS® Existing-Home Sales Report. Existing-home sales are also hurting because of the lack of affordable financing with the 30-year fixed rate mortgage still above 6%.

"Record-high housing wealth and a record-high stock market will help current homeowners trade up and benefit the upper end of the market. However, sales of affordable homes are constrained by the lack of inventory," Yun added. "The Midwest was the best-performing region last month, primarily due to relatively affordable market conditions. The median home price in the Midwest is 22 percent below the national median price."

We got to the housing shortage largely because of bad politics and a record income inequality for working Americans that must be reversed. The best programs that subsidize building for more affordability include zoning for more units in areas near transportation centers, a state and local government mandate, and more funding set aside for affordable housing, such as tax breaks to builders for building more low income and first-time homebuyers.

Biden did that during his four years with his Housing Action Plan, that subsidized affordable housing as well as rents, but alas, much of that funding has been cut by Trump’s DOGE team in the name of downsizing government.

And a brisk summary of what Trump is doing to HUD, the government’s main housing administrator, is summarized by Shelterforce:

· HUD relaunched its website in late March, after removing 90 percent of

its content, under the pretext of improving user experience. Research publication archives, recent press releases, and much more were removed, and a religious quote of Secretary Turner’s was placed on the homepage.

· HUD Headquarters to Be Sold: With an April 15 executive order intended

to “restore common sense to Federal office space management by freeing agencies to select cost effective facilities and focus on successfully carrying out their missions for American taxpayers,”

The Trump administration, in other words, is doing almost nothing at the federal level for housing in its quest to slash government spending in order to fund Trump’s tax cuts.

Why must the federal government do better to support housing? The GW Bush administration set housing construction back a decade by causing the housing bubble with lax regulation and too easy credit conditions.

The American people will want a government that better serves Americans’ housing needs to make up for the years of mismanagement and neglect. Otherwise, the dream of many Americans for more affordable housing will forever be out of reach.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

We Can Fix the Housing Shortage

 The Mortgage Corner

“Privately-owned housing starts in July were at a seasonally adjusted annual rate of 1,428,000. This is 5.2 percent above the revised June estimate of 1,358,000 and is 12.9 percent above the July 2024 rate of 1,265,000. Single-family housing starts in July were at a rate of 939,000; this is 2.8 percent above the revised June figure of 913,000.” US Census Bureau

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The housing shortage is something most of us worry about but are helpless to fix, it seems. There are many culprits—the NIMBY crowd that won’t allow more affordable housing near their single-family homes in cities, too high mortgage rates, but most of all the seeming inability of builders to supply enough new homes due to the shortage of construction workers.

First some history. Originally, much of it was due to the busted housing bubble that led to the Great Recession in 2008. More than one million new homes were built than could be sold, a classic example of oversupply. This resulted in just 600,000 new homes being constructed annually until 2012 when the Fed began its quantitative easing policies under Fed Chair Ben Bernanke that dropped 30-year fixed mortgage rates below 5% for the first time since the 1970s.

This is why I’m using residential housing construction as a good way to measure housing supply in the above FRED graph of housing construction. Starts have hovered around 1.4 million units since 2022 and the end of the COVID-19 pandemic (gray bar).

Construction had soared immediately after the pandemic due to the rock-bottom 30-year fixed mortgage rates, then plateaued to the current 1.4 million. But the Fed raised the rock-bottom rates to combat surging inflation and fixed mortgage rates soared to 7%, making housing purchases almost unaffordable to first-time, entry level buyers.

So, we know high mortgage rates are a major component of the housing shortage. But we can also answer maybe the largest part of the problem, the lack of new homes as highlighted in a recent Forbes Magazine article. Trump’s immigrant sweeps are not only hurting housing construction, but the job market in general.

“Immigrants make up 34% of the construction workforce, according to the Associated General Contractors of America. In states like California, Texas, New Jersey, Florida, Georgia and New York, they account for about half. Construction drives 4.5% of U.S. gross domestic product, making it the country’s tenth largest industry.

“Broaden the view and the impact grows. Residential housing, once you include rent and utility payments, fuels 15 to 18% of GDP, according to the National Association of Home Builders. Add commercial building to the mix and construction rises to the top of the chart.”

The good news what may come out of the housing shortage and homeless scourge. The highly unpopular immigrant sweeps of ICE agents invading homes, public streets, and workplaces.

The sharp drop in nonfarm payrolls in the last three unemployment reports is being blamed on the loss of possibly one million immigrants from our labor force, according to labor economists. This will hurt economic growth, because immigrants have traditionally supplied one million new Americans each year to our rapidly declining population growth rate.

Forbes cites a working paper published this month from the American Enterprise Institute (AEI), a conservative economics policy center, that found the Trump administration’s immigration policy will “likely result in a negative net migration in 2025—something the U.S. has not experienced in decades”—that would shrink labor participation and “put significant downward pressure on growth in the labor force and employment.”

It's a very sad tale. Trump’s Republicans have turned their backs on what has been the life blood of American Democracy that we can do little about without  without recognizing that we can't do it without immigrants.

Harlan Green © 2025

Follow Harlan Green on: https://twitter.com/HarlanGreen

When Will Housing Recover?

 The Mortgage Corner

“Overall, I expect tariffs to boost inflation by about 1 percentage point over the second half of this year and the first part of next year,” John Williams, New York Fed President.

 

NPR

Such remarks mirror what many of the Fed Governors who vote on interest rates are saying. Expectations for higher interest rates abound as a result of the inflation expectations. It’s why the housing market may have to wait until next year to recover. The 30-year fixed mortgage rate is still hovering close to 7 percent, which is keeping first-time buyers out of the housing market and elevating rental rates.

There are other reasons to wait, of course. The housing shortage, a lingering victim of the slow recovery from the Great Recession’s busted housing bubble, is keeping home prices from declining.

And President Trump’s on-and-off attempts to bully Fed President Jerome Powell and the 12 Fed Governors to lower interest rates isn’t succeeding, despite Trump’s daily insults.

It’s another version of TACO Trump’s negotiating skills. He only knows how to bully, which is why he has left a trail of bankruptcies and lawsuits throughout his business career. But Trump keeps denying he is about to fire the Fed Chairman that he appointed in his first term.

It’s also why Trump and his allies claim tariffs are not causing inflation, and the president saying, “inflation is dead” so he can justify his push for rate cuts. Trump has called on the Fed to slash interest rates by as much as 1%, with the Fed’s benchmark rate still in the 4.25%-4.5% range.

That will ultimately happen because there is almost unanimity among economists that the tariffs will make everything more expensive, which will ultimately slow growth enough to require the Fed to act.

Realtors and some economists are also calling for lower mortgage rates to strengthen the housing market. Mark Zandi, chief economist of Moody’s Analytics is worried “Housing will … soon be a full-blown headwind to broader economic growth,” he wrote in a post on X and LinkedIn, “adding to the growing list of reasons to be worried about the economy’s prospects later this year and early next,” as cited by MarketWatch.

There is a slight hope that home sales might improve this year, according to the National Association of Realtors (NAR). Pending home sales—that are homes under contract but not closed—increased by 1.8% in May from the prior month and 1.1% year-over-year, according to the National Association of REALTORS® Pending Home Sales report.

"Consistent job gains and rising wages are modestly helping the housing market," said NAR Chief Economist Lawrence Yun. "Hourly wages are increasing faster than home prices. However, mortgage rate fluctuations are the primary driver of homebuying decisions and impact housing affordability more than wage gains.”

Existing-home sales have been stagnant for years, hovering around 4 million annual sales since January 2022 when the Fed first began to raise interest rates, but were up +0.8% from April to a seasonally adjusted rate of 4.03 million in May 2025. Sales declined 0.7% year-over-year, however.

When will builders have enough confidence to build more homes, including affordably priced homes? New home sales, which constitute approximately 13.4% of all US home sales, dropped 13.7% in May 2025 to a seven-month low of 623,000 units. This decline was the largest since June 2022.

Builder confidence in the market for newly built single-family homes was 34 in May, down six points from April, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This ties the November 2023 reading and is the lowest since the index hit 31 in December 2022.

Interest rates must eventually come down because as Mark Zandi says, poor housing sales are already a “full-blown head wind” to higher growth and the Fed will have to act to counter the added ‘head wind’ from the tariffs.

But how long must we wait for that to happen, and will it be soon enough to prevent something even more serious from happening?

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

How Much LONGER Do We Wait?

 The Mortgage Corner

“The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent on a seasonally adjusted basis in March, after rising 0.2 percent in February, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.4 percent before seasonal adjustment.”

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Will home sales pick up at all this year? It could happen. Because inflation is declining at the moment, thanks to the tariff chaos. That’s because economic growth is slowing as the supply bottlenecks increase for autos, auto parts, construction materials and just about everything else that is imported.

This will ultimately drive-up prices, unless ultimately resolved, or we have a recession.

Fed Chair Powell said recently that the tariffs are causing too much uncertainty for the Fed to act one way or the other now, which is reflected in the sudden drop in the Consumer Price Index inflation in the above graph. There is the fear of recession in the air, which is discouraging home buyers as well.

It’s also keeping much needed new home construction on the sidelines. “Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions,” said NAHB Chief Economist Robert Dietz. “The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases on building materials due to tariff

Privately-owned housing starts in March were at a seasonally adjusted annual rate of 1,324,000. This is 11.4 percent below the revised February estimate of 1,494,000 but is 1.9 percent above the March 2024 rate of 1,299,000.

Housing should be aided by moderating consumer inflation but fixed mortgage rates are still hovering close to 7 percent. Housing construction is attempting to fill the supply void. But prices won’t improve because of the tariffs on Canadian lumber and metals such as aluminum, for starters.

Meanwhile housing costs continue to go up. Newsweek reports that between March 2024 and March 2025, the biggest year-over-year price jumps were reported in the cost of natural gas (up 147.6 percent), copper wire and cable (up 13.4 percent), softwood lumber (up 12.6 percent) and construction sand, gravel and crushed stone (up 8.3 percent).

Who can still afford to buy a home? The NAR's 2025 Home Buyers and Sellers Generational Trends report found that the combined share of younger boomers (ages 60–69) and older boomers (ages 70–78) rose to 42% of all home buyers in the past year. Millennials dropped to 29% of all buyers – down notably from 38% a year ago. Generation X buyers (ages 45–59) held steady at 24%.

So first-time, entry-level homebuyers are being left out of the market at present. Home sales would pick up if the Fed Governors would realize how lower rates would energize buyers. I believe the Fed could lower rates in June, just in case the supply bottlenecks really begin to grind activity to a halt. Everyone seems to be waiting to see what President Trump’s grand plan may be, other than to intimidate every other country on the planet (which won’t work).

So, the tariffs are making home buying even less affordable. It looks like we will have to wait until the Fed begins to cut interest rates again and we see lower mortgage rates.

With the crazies in charge, who knows when?

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen