The Headwinds Against Homeownership in America

Homeownership is in trouble. During the COVID crisis in the second quarter of 2022, the US Census Bureau reported the Homeownership Rate in America was 67.9%. By the fourth quarter 2024 they reported the homeownership rate had dropped to 65.6%. It’s still in atrophy as we are near the end of 2025.

There are many reasons for that decline. We’re going to provide some insight about “why” – but more importantly – we’re going to offer a series of solutions to rectify the mess. Assume it’s up to us to provide solutions. Because whatever policies that have been promulgated or proposed by policy makers from 2022 through 2025 have produced negative results.

 We’ve broken down the problem into five categories. Here they are:

1. The shortage of affordable single-family home inventory available for sale

2. The constriction of credit and the persistent barriers put up by policy makers

3. The radical shift in mortgage interest rates and government housing policy

4. The skyrocketing cost of hazard insurance and the lack of a solution

5. The government shutdown and the impact on the future of homeownership

The Shortage of Affordable Single-Family Home Inventory 

In 2024 there were fewer single-family homes sold than at any time in the last couple of decades. Realtors don’t have inventory to sell – aspiring homeowners don’t have inventory to buy – lenders aren’t making as many loans as they would like – and consumer groups are tired of the beleaguered consumer frustration. Many existing homeowners would dearly love to sell their current home to step up to a bigger house – or down to a more livable space. But these existing homeowners are not about to trade out of their 3% mortgage to trade up to a prevailing 7% mortgage. So, they stay put. And the property doesn’t get listed for sale when in many cases, it would be the best thing to do for that existing homeowner. Likewise, the homebuilders in America are facing persistent burdens that have forced a lack of new supply to meet past and current demand. For example – on the average home built in America, builders are facing an average regulatory and compliance cost of $94,000 per house. In addition, the restrictions on the availability and cost of acquisition, development and construction financing and the cost of new tariffs are creating a huge “headwind” for builders everywhere in America.

The Constriction of Credit and the Persistent Barriers put up by Policy Makers

Congress passed SB 2155 containing the Credit Score Competition Provision in 2018. It became law soon thereafter. The Bill required policy makers to deliver the methodology for acceptance of credit scoring models in the mortgage sector other than the FICO Classic Credit Scoring Model. We’re about to enter 2026, and the “competition” has yet to be implemented. VantageScore reported that 37 million additional consumers could receive a credit score using its model. Whether the number is 37 million or 37 thousand – this delay in implementation is unacceptable. In addition, there were hundreds of lenders across America that created Special Purpose Credit Programs (SPCPs) to advance their outreach to the first-time homebuyer population. These lenders worked for years to develop these special programs and to get them approved for use through Fannie Mae and Freddie Mac (the Government Sponsored Enterprises – GSEs). Hundreds of these SPCPs were working and advancing outreach and opportunity to first-time homebuyers. That is, until the new FHFA Director cancelled ALL of them earlier in 2025. While some banks are trying to sustain these programs, the loans are no longer eligible for sale to the GSEs and have limited viability because of the balance sheet restrictions on Private Lenders. Add to that that the average credit score on loans purchased by the GSEs over the last few years is 752. Credit scoring models consider a GOOD credit score of 670-739. It’s obvious that the GSEs are far more interested in GREAT credit scores than GOOD ones. The average credit score in America is approximately 715. The GSEs appear to be far more interested in the elite consumer than the average consumer.

The Radical Shift in Mortgage Interest Rates and Government Housing Policy.

Between 2010 and mid-2022, the Federal Reserve purchased most mortgage loans made in America while driving interest rates down to their lowest level in history. That policy was described by the Fed as “Quantitative Easing”. Beginning in mid-2022 (to curb inflation), the Fed raised interest rates eleven times over the next 18 months in what we called “Quantitative Squeezing”. Mortgage interest rates went up by 154% over that period, going from approximately 2.75% to 7%, and interest rates on credit cards, auto loans, and other types of loans went up in a similar fashion. While this was going on, the Federal Housing Administration maintained its “over-reserve” of the Mutual Mortgage Insurance (MMI) Fund. Historically, that MMI fund has maintained a “total dollar reserve” compared to mortgage volume outstanding of 2.0%. At the end of 2024, the MMI fund was operating with a reserve ratio of 11.47% - nearly SIX times greater than the benchmark of 2.0%. That means that every FHA borrower that received an FHA mortgage paying a one-time up-front MMI insurance premium of 1.75% of the mortgage amount (on a $350,000 loan that’s just over $6,000 paid at closing) could have been paying SIX times less than they were charged which would have been approximately $1,000 on the same loan. In addition to these “headwinds”, at the end of 2024, the GSEs took a reversal of future credit loss reserves into current income. We assume their actuaries determined they were OK to do so because they were expecting lower future credit losses. At the same time, on new mortgage loans sold by Lenders to the GSEs, the GSEs increased the Guarantee Fees (GFees) paid by Lenders which are passed on to consumers. Some of those GFees go to cover future credit losses. How odd?

The Skyrocketing Cost of Hazard Insurance and the Lack of a Solution

Home insurance costs have gone up 40.4% since 2019. In some cases, insurance costs are equal to or greater than principal and interest payments on mortgage loans. The American Property and Casualty Insurance Association reports that insurance companies have experienced five consecutive years of losses on their hazard insurance business. With rising house prices and replacement costs, a shortage of materials and labor, higher cost of capital and reserves for insurance companies, higher frequency of natural disasters, and the increasing cost of tariffs, the short-term future of hazard insurance looks quite bleak. Congress seems to be quite good at setting up investigations and commissions on many topics. How about a commission charged with figuring out how to lower the cost of hazard insurance across America. That just might be a good use of time for members of Congress.

The Government Shutdown and the Impact on the Future of Homeownership

We were captivated by the recent story of a 30-year-old woman with a decent job and good credit attempting for the last nine months to find a home to buy in a modest Midwest city. Nearly every time she found one to her liking – she was outbid by an institutional investor – not a future homeowner – by thousands of dollars over the listing price. She has decided to give up because she simply doesn’t want to experience that emotional stress any longer.

There are thousands of consumers just like her. Boxed out of homeownership opportunity because of inventory shortages – credit policy – interest rates – or lack of priority by policy makers. In fact – Congress is shut down. This is taking a toll on consumers of America. Of course, the affected workers are facing uncertainty they have likely never felt. This government shutdown feels different. America was built on a foundation that the PEOPLE came first – and that good Policy needed to serve them – but this feels so much different. It feels like the political party is the priority – and policy must deliver victory for the party – and somewhere down the pecking order – stand the PEOPLE, clearly subservient to the political parties and the policy designed to give victory to one side of the isle or the other.

America’s Homeowner Alliance stands ready to help fix this Homeownership Crisis. We can’t promise we’ll deliver miracles. But we can promise practical solutions in every one of these areas. Stay tuned for the “Solutions” coming in the next Road Home Newsletter.

Remember - Membership in the America’s Homeowner Alliance is FREE. Join us please at www.myaha.com. With your voice, we can fix this homeownership crisis.