Faulty reasoning signals

• Confirmation Bias - 5% (105 hits)
• Anchoring Bias - 2.4% (50 hits)
• Availability Heuristic - 6.5% (137 hits)
• Representativeness Heuristic - 7.5% (157 hits)
• Hindsight Bias - 4% (85 hits)
• Overconfidence Bias - 3.6% (76 hits)
• Framing Effect - 5.9% (124 hits)
• Loss Aversion - 0%
• Status Quo Bias - 1.9% (40 hits)
• Sunk Cost Effect - 0%
• Optimism Bias - 6.5% (137 hits)
• Pessimism Bias - 7.7% (161 hits)

Article text

In 250 Years of U.S.

Housing, We Are Now Living in Unprecedented Times

We are living in “unprecedented times” when it comes to the U.S. housing market, according to experts.

In the 250 years of the nation’s history since its declaration of independence from Great Britain in 1776, this is the first time that Americans are struggling so much to become homeowners as a result of a widening gap between wages and home prices.

Home prices have grown by roughly 60 percent since the onset of the COVID-19 pandemic, according to JP Morgan data.

Mortgage rates are historically high, and have been so since 2022.

And the U.S. homeownership rate hit its lowest level since 2019 last year, at 65 percent, according to Census data.

“I think right now the housing market is pretty unprecedented,” Daryl Fairweather, chief economist at Redfin, told *Newsweek*.

“We have the highest home prices that have ever been on record, along with pretty high mortgage rates.

The mortgage rates aren’t the highest we’ve seen on record—they exceeded 18 percent in 1981—but they are higher than they have been for the last 10 years or so.

“And so housing affordability has gotten really bad, especially for young people who don’t already own homes.

Breaking into the housing market is incredibly tough.”

It is a struggle that throws a hard blow to the very heart of America’s identity.

“Property ownership goes back to the founding of this country," Fairweather said.

"Life, liberty and property, that’s what was promised to be protected.

John Locke used that formulation, and it deeply influenced the Founders.

The Declaration of Independence swapped in ‘the pursuit of happiness,’ but the Fifth Amendment explicitly protects property rights.

“Thomas Jefferson really promoted this idea of the independent landowner as the foundation of democracy.

Andrew Jackson later expanded political participation beyond the propertied class while pushing westward expansion.”

At the time, the country had homesteaders “who went out into the wilderness and onto Native American-owned or -occupied land, staking their claim.

The Homestead Act of 1862 formalized this, granting 160 acres of public land to settlers—land that was, in most cases, forcibly taken from Indigenous nations,” Fairweather said.

Part of the whole appeal that the United States exercised on European immigrants at the time was it offered “this seeming abundance of open land,” she explained, unlike Europe.

“Obviously the Native Americans were already there, but there was an opportunity for people coming from Europe to own land that they would not have had the opportunity to own had they stayed in their countries,” she said.

“So this idea of owning land, it definitely goes to the core of American identity.

And the structure of our entire economy.”

Now, that structure—rooted in land-owning, slavery and blood but grown into the much more palatable dream of a white picket-fenced house and personal and financial independence—is shaking and suddenly feels as fragile as a house of cards, as millions remain shut out of the dream of homeownership.

Broken Promise.

What Went Wrong?

Throughout American history, “policymakers have encouraged homeownership as a means of building generational wealth and establishing a robust middle class,” Joel Berner, senior economist at Realtor.com, told *Newsweek*.

“Homeownership really gels with American values of independence and self-reliance, and throughout American history it has become part of our culture and identity,” he said.

“Primarily, housing has acted as a wealth generator and wealth store for families who have been able to break into homeownership.

These families can pass down wealth in the form of home equity and firmly establish future generations in the middle class or higher.

Housing is also a driver of consumer spending, as homeowners continually furnish and renovate their homes.”

Fairweather is largely of the same opinion.

“I think there’s this belief in America that the landowning class, the homeowning class, has been the wealthiest class,” she said.

“Even today, people who own homes have much of the wealth, and people who rent tend to have no wealth at all, or are actually in debt some of the time.

There’s this belief that kind of emerged in the 1990s and 2000s that if we just made everyone into homeowners, everybody could be middle class.

Everybody could be well off in this country.”

But that crucial piece of the American dream was shattered after the housing bubble burst in 2007-2008, showing that the system Fairweather described wasn’t sustainable, “or at least the way we went about it—through subprime lending and lax regulation,” she said.

Despite that major setback, homeownership still lives on as a key part of the American dream, with roughly two-thirds of Americans reporting that they have the goal of owning a home, according to a 2025 survey by Realtor.com.

“There’s still this belief that if you own a home in America, you have made it," Fairweather said.

"And we set up our tax system to reinforce that idea, that once you become a homeowner, you benefit from the tax system through the mortgage interest deduction and low property taxes, and property taxes even being deducted from federal taxes.

“All of that contributes to an economy where homeowners are better off than renters.”

This would not be a problem if renters could see the property ladder on the horizon, as they work and save for a down payment.

But the ladder has been moving ever further out of reach in the past decades, especially since the pandemic.

Brad Case, Homes.com’s chief residential economist, has looked at data going back to 1776, trying to find where it all went wrong.

He believes the root of the current affordability crisis lies not only in the shortage that experts have been widely pointing to as the culprit over the past few years but also a tendency to look at properties as investments rather than homes.

For decades, buying a home was not an easy feat for Americans.

Homeownership became significantly more accessible after the introduction of the 30-year fixed-rate mortgage by the federal government in the 1930s, which opened up homebuying to millions of people.

For decades after that, the system somehow worked, according to Case.

“Until somewhat recently, house prices were increasing at slightly more than the rate of inflation, but so were incomes.

And so incomes were keeping up with house prices,” he told *Newsweek*.

“But in the 1970s and the 1980s, mortgage rates went way up because we had a tremendous inflation problem.

When mortgage rates came down from that, that’s when house prices started going up more rapidly than inflation and incomes.

“And as a result of that, some people got the idea that they should buy a house, not because they wanted a place to live, but rather because they had seen house prices going up, and so they thought it was a good investment.”

When you create the expectation that buying a house is a good investment and more than half the people in the country are benefiting from that as homeowners, “then suddenly you’ve got the basis for public policy that forces house prices to go up even more rapidly,” Case said.

“That’s what has broken recently.”

That is the reason we see resistance to building new houses despite the acknowledgment of a significant shortage across the country, Case said, especially resistance to building houses that are reasonably affordable.

“The existing homeowners in any particular city will say, ‘let’s not build new houses unless they’re really, really expensive.’

Because if they’re really, really expensive, then those people will pay high property taxes and we won’t be responsible for sort of covering municipal expenses," he said.

"That’s the dynamic that cropped up in the last few decades.”

President Donald Trump told reporters in December that he wanted to prevent home values from falling to keep homeowners from losing equity, despite promising to make homebuying and homeownership more affordable for all Americans.

Is There a Way Out?

The post-pandemic housing market is pretty much uncharted territory for Americans.

Mortgage rates dropped to around 3 percent during the pandemic, unleashing the homebuying frenzy that, clashing with tight inventory nationwide, brought up prices.

Since then, mortgage rates have roughly doubled.

“That meant that a lot of people got into the housing market during 2020, 2021, and then the door shut right behind them,” Fairweather said.

“That has led to a housing market that is incredibly stuck, because the people who own homes don’t want to give up their record-low mortgage rates.

They’d have to get another mortgage at prevailing rates if they wanted to move.

“And home buyers are up against high rates and high prices, so they can’t afford to buy.

That’s why the housing market is so stuck, and it looks unlike any other period in history.”

The U.S. housing market this year has remained sleepy through the spring, traditionally its busiest season.

There are more than 400,000 more sellers in the market than buyers, but these are not “serious sellers,” according to Fairweather.

“They are quick to delist their homes," she said.

"We’re seeing a record-high share of homes being delisted.

I think that just goes to show that these sellers are not really willing to meet buyers where they’re at.

Sellers and buyers just can’t see eye-to-eye right now.”

There is also another apparent anomaly.

Normally when mortgage rates go up, home prices come down in response.

But this time, “supply and demand backed off at the same time,” Fairweather said.

“So we’re just seeing fewer transactions and stubbornly high prices.”

According to Berner, the current market is facing “a more chronic, structural challenge than it has in the past when it has been on the verge of acute collapse,” he said.

“We're living in a period where the supply of homes cannot meet the demand for them.

It is perhaps most similar to the period before the passage of the Homestead Act in that new homes need to be created for Americans to live in.

Back then, the government just gave away land for development, which is far less of an option today.

"Instead, current efforts are focusing on reducing regulatory barriers to new construction, which could have a major impact, but will deliver it in less of a direct and immediate way.”

There might be light at the end of the tunnel, according to Fairweather, Berner and Case, though it might be far away.

The housing market this year is already recalibrating, but in an uneven way, Berner said.

In some markets, primarily in the South and West, “prices are dropping as the shock of the pandemic-era buying frenzy is finally absorbed and new construction is keeping pace with demand,” Berner said.

“In others, primarily ones in the Northeast and Midwest, new construction is limited and the markets are still struggling with diminished inventory.”

The future will bring more affordability to the U.S. housing market, Fairweather said, as wages will start to catch up with slower home price growth and mortgage rates will likely remain stable.

Baby boomers, a big generation owning an outsized share of homes in the U.S., are also expected to leave their homes in the coming years and decades.

Fairweather thinks it will make it more affordable for younger generations to buy a home, though she fears it will become more expensive to own that same home.

“Insurance costs are rising with climate change.

Homes are old and they’re going to require a lot of upkeep and maintenance, especially those homes that baby boomers are passing down, and those homes are going to be old and out-of-date,” she said.

“And it’s still going to be a problem that there is not enough housing in the places that have the best jobs, the places that people most want to live.

Just because baby boomers are selling their homes in Florida and Arizona doesn’t mean that housing is going to get more affordable in the Bay Area.

We still need to build housing in the places that have historically not built enough.”

In short, housing will likely get more affordable in the future, but the fight for a more affordable and sustainable housing market will continue on, Fairweather said.

Case said: “The solution to affordability is absolutely nothing more than income growth.

And to the extent that we can achieve income growth, great.

“But there’s also a behavioral problem to target, people have this idea that you should buy a house as an investment.

You should never buy a house that has an investment, you should buy a house because that’s where you want to live and you can’t live there unless you buy it.”