Housing Market Trends is the National Association of Home Builders’ newly released Cost of Housing Index (CHI) indicates that a typical family must devote 38% of its income toward the monthly mortgage on a median-priced new single-family home in the U.S.

For households earning only half of the median income, the burden is much heavier Housing Market Trends — about 77% of their earnings would be required to cover that same mortgage.

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The situation is similar for existing homes, where prices hit a record high last month. A median-income family would need to spend 36% of its income on payments for a median-priced existing home, Housing Market Trends while a lower-income household would have to commit 71% of their income.

According to NAHB’s Eye on Housing, roughly 103.5 million U.S. households do not earn enough to qualify for a mortgage on a median-priced new home ($495,750) under current lending standards.

Limited housing supply is another major challenge. Although the number of newly built single-family homes available in May rose 12.9% compared to the year before, the total inventory of new and existing homes combined amounts to only 4.4 months’ worth of supply. That is up slightly from April’s 4.1 months and from 3.6 months in May 2023, based on NAHB data.

Elevated mortgage rates are also discouraging current owners from selling. Many are locked into lower-rate loans, Housing Market Trends and purchasing another home at today’s higher rates would result in a significant jump in housing costs.

The cost of owning a home is soaring in many of the nation’s most desirable cities, according to the CHI. The index reviewed housing affordability across 176 metro regions and identified eight areas as “severely cost-burdened,” meaning more than half of a typical household’s income would be required to cover the mortgage on a median-priced existing home. Another 80 markets were deemed “cost-burdened,” where families must allocate between 31% and 50% of their income to housing expenses.

Regionally, households in metro areas across the central U.S. generally face lower home prices relative to income compared to those living along the coasts or in the South and West. Among the five most heavily burdened housing markets, three—San Jose-Sunnyvale-Santa Clara, San Diego-Chula Vista-Carlsbad, and San Francisco-Oakland-Berkeley—are located in California. Naples-Marco Island, Florida, and Urban Honolulu, Hawaii, completed the top five list.

Aside from the metropolitan regions near Chicago and Milwaukee, states in the Midwest such as Illinois, Iowa, Michigan, and Ohio tend to have the least financially burdensome housing markets.

The shortage of affordable housing and the decline in available homes are discouraging potential buyers from putting down roots.

Almost 80% of Americans believe the nation is experiencing a housing affordability crisis and feel that public officials are failing to take sufficient action to confront the ongoing issue, according to a Morning Consult poll.

A major cause of the problem lies in government regulations that slow down housing development. These rules contribute to about one-quarter of the price of a single-family house and over 40% of the expense of building a standard apartment complex.

Other contributing factors include the steep rise in construction material costs (up 38% since the pandemic), a persistent lack of skilled workers, delays in passing federal tax reforms aimed at lowering building expenses, and the sharp increase in local impact fees and other upfront charges.

A decade after the 2007–2009 financial meltdown, housing has again taken center stage, though for the opposite reasons. While the Great Recession was defined by collapsing home values, the years since have seen steady growth in both prices and rents, fueling fears of a worsening affordability crisis. Once thought to be a problem confined to costly metro regions, the challenge of affordable housing has now become a nationwide concern—drawing attention from the public as well as leaders in politics and the private sector.

One area where this momentum has surfaced is in renewed debates over rent control. By 2018, only four states and Washington, DC had any local rent regulation, but several states have since moved to expand it. In California, frustration over soaring housing costs drove a 2018 ballot measure (Proposition 10) that aimed to repeal the 1995 Costa-Hawkins Act, which restricted local governments’ ability to impose rent control. Despite strong public concern, voters rejected Prop 10, in part due to fears that it could extend regulation to single-family homes as well as large rental complexes. In 2019, Oregon became the first state to enact statewide rent control, limiting annual increases to the rate of inflation plus 7% and prohibiting “no-cause” evictions. Soon after, New York passed stricter rent regulations and expanded them beyond New York City to much of the state. California later followed with a statewide law capping rent hikes at 5% plus inflation, while also placing new limits on evictions.

Policymakers have also explored broader reforms beyond rent caps. Minneapolis adopted its Minneapolis 2040 plan, effectively eliminating single-family-only zoning and allowing greater housing density across residential neighborhoods. The Seattle Planning Commission proposed comparable steps in its Neighborhoods for All report, emphasizing that opening single-family areas to more housing—especially in high-cost neighborhoods—is crucial to curbing displacement of vulnerable residents. Salt Lake City’s Growing SLC strategy includes similar calls for upzoning to expand housing supply. Data highlights the pressure: from 2011 to 2014, rents grew at more than twice the pace of renter wages, while home prices rose four times faster than incomes of homeowners.

The issue of affordable housing also became a major theme in the run-up to the 2020 presidential election. Democratic candidates advanced a range of ideas, including construction subsidies, down-payment aid, zoning overhauls, and revised mortgage rules. On the federal level, the Trump administration released a 2019 memorandum on housing finance reform, calling for changes that maintain access to mortgage options for qualified buyers while clarifying the role of government-sponsored enterprises (GSEs) in promoting affordability. Later that year, President Trump signed Executive Order 13878, creating the White House Council on Eliminating Regulatory Barriers to Affordable Housing.

Efforts have extended beyond public policy measures. In March 2017, Housing Trust Silicon Valley introduced the TECH (Tech Equity Community Housing) Fund to offer flexible financing for affordable housing developers, with the goal of spurring the creation of at least 5,000 below-market-rate homes for individuals earning less than 60% of the area’s median income. To date, the fund has raised over $100 million, supported early on by major contributions from Cisco, LinkedIn, and other corporations. In July 2019, Google committed $50 million to the fund as part of its broader $1 billion affordable housing initiative in the San Francisco Bay Area. Meanwhile, some companies have begun testing 3-D printing as a way to construct housing at far lower costs compared to traditional building methods.

Following a review of recent trends in housing prices, the remainder of this paper explores the economic dimensions of housing affordability policies. Such measures take a variety of forms. For instance, the structure of the U.S. housing finance system primarily seeks to expand homeownership. It relies on government-sponsored enterprises to provide mortgage market liquidity, coupled with tax incentives for homeowners and direct buyer assistance. In addition, the federal government supports rental housing through both tenant-based and project-based programs, including vouchers and the low-income housing tax credit. Finally, this paper evaluates the effectiveness of rent control and examines the influence of zoning and land-use rules. Crucially, policies that work to increase low-income housing demand are more likely to succeed when paired with strategies that ease restrictions on housing supply.

One way to track housing prices is through the Federal Housing Finance Agency, which develops a repeat-sales price index based on single-family homes with mortgages backed by Fannie Mae or Freddie Mac. This index provides wide regional coverage but does not fully represent all housing markets within each area (for example, properties financed with non-conforming loans are excluded). As shown in figure 2, since 2011 home values have generally rebounded across most of the nation, with the exception of a few counties shaded in dark blue. States hit hardest by the 2006–2011 housing collapse—California, Arizona, Nevada, and Florida—have seen some of the strongest rebounds, followed by much of the Mountain West, the Pacific Northwest, and selected areas in Texas, Tennessee, and North Dakota.

That said, the right-hand side of figure 2 illustrates that in California (outside the San Francisco Bay Area), Arizona, and Florida, the recent run-up in prices has not been enough to fully recover from the downturn. In these regions, the appreciation of the past decade is best understood as a return to pre-crisis levels, whereas much of the country’s interior has experienced gains that highlight the growing challenge of housing affordability from the standpoint of ownership.

Previously, states such as Texas and North Dakota were largely shielded from steep increases in housing costs, yet both now rank among the fastest-growing markets. Comparing figures 1 and 2 suggests that the link between income growth and home price appreciation has been relatively weak in recent years, pointing to other drivers behind regional variations in housing dynamics. If rising prices were limited to luxury properties, the issue might be less pressing in terms of affordability. However, Zillow’s data indicates that appreciation has been especially strong among entry-level homes—the lower-priced segment of the market.