For greater than 80 years—because the days of the New Deal—the US federal authorities has launched into all kinds of insurance policies that had been ostensibly meant to extend the homeownership price. The underlying concept—a fairly doubtful one, at that—has at all times been that homeownership is a proxy for financial prosperity.
It’s debatable whether or not or not such reforms have ever really labored to extend the homeownership price, although. In 1930, on the very starting of the Nice Despair, the homeownership price was 44 %. In the course of the thirties, the federal authorities adopted insurance policies that created Fannie Mae and ushered within the period of the 30-year mounted mortgage.
Homeownership subsequently elevated considerably after the tip of the Second World Struggle, and this continued into the Sixties with the homeownership price reaching almost 65 % in 1970.
[Learn Extra: “Are Today’s Homeownership Rates Sustainable?“ by Ryan McMaken]
It’s unclear whether this was fueled by any government policy or if it was a result of the US’s rapid post-war expansion during that period. Moreover, rising homeownership levels were likely influenced by the fact that the average marrying age fell after the War and stayed unusually low during the fifties and sixties.
Whatever the cause, the homeownership rate rose to 65.5 percent in 1980, and has never returned to pre-war levels below 60 percent.
Since 1980, however, the homeownership rate in the United States has gone approximately nowhere. According to the Census Bureau’s most recent quarterly estimate on the homeownership level in the United States, the homeownership rate during the first quarter of 2025 was 65.2 percent. That’s down from the fourth quarter of last year when the homeownership rate was 65.7 percent. The first quarter’s rate is also down from the first quarter of last year when the rate was also 65.7 percent.
Source: US Census Bureau.
Yes, there was sizable growth in the homeownership rate during the housing bubble from 2002-2006, but that all collapsed in the ruins of Great Recession and the post-2007 foreclosure glut.
So, in 2025, the homeownership rate is almost exactly where it was 45 years ago, in 1980. This is the current reality in spite of the fact that the average 30-year mortgage rate has collapsed from 18 percent in 1981 to less than seven percent in 2025. This has acted as a de facto subsidy for home prices, since lower mortgage rates allows sellers to raise asking prices for homes. Thus, home prices move opposite mortgage rates, so we see that falling mortgage rates have simply led to higher home prices, and not to more affordable homes. This is reflected in the fact that affordability in home prices is the lowest its been in decades, and the average age of home buyers has surged.
Source: US Census Bureau, Federal Reserve Board of Governors
Politically, however, the central bank’s efforts to force down interest rates—which has required monetary inflation—has been justified on the grounds that it “increases homeownership.” Furthermore, Federal policymakers since 2008 doubled down on subsidizing residence purchases with the bailouts of Fannie Mae and Freddie Mac in 2008.
But, none of this has produced extra reasonably priced properties. It has solely led to cost inflation. This has been nice for Wall Road and people who already personal belongings. It’s been a catastrophe for youthful folks and first-time residence patrons.
In his column final week, Alex Pollock summarized the issue, and provides an answer:
What has the huge US authorities intervention in mortgage lending achieved in the way in which of improved residence possession? The US residence possession price was about 64 % in 1970 and it’s 65 % in 2025. It has hardly elevated in 55 years, all the federal government and government-sponsored housing finance however.
The federal government intervention has, nonetheless, helped inflate two twenty first century home worth bubbles. The primary peaked in 2006 and led to the monetary disaster of 2007-09. The second despatched common home costs far above their 2006 peak, together with rising at over 18 % in 2021. This has led to their persevering with unaffordable ranges, particularly for younger households attempting to purchase their first home. Though the speed of improve has now grow to be reasonable, common home costs are nonetheless rising, on the annualized price of three % in April 2025. With inflation at 2.3 % for that month, common home costs are additionally nonetheless going up in actual phrases.
It’s usually noticed that US home costs are just too excessive, which helps clarify why gross sales of current homes in 2024 had been the fewest since 1995, despite the fact that the inhabitants is 27 % bigger than then.
We will conclude that the huge scale of US authorities intervention in guaranteeing and subsidizing of mortgage debt has been a mistake. The housing finance system ought to develop extra personal, with the market share of the GSEs being systematically decreased and the federal government’s general function getting smaller. The Federal Reserve’s goal for funding in mortgages ought to be zero. The federal government ought to goal a considerable discount within the share of the mortgage promote it ensures. As a primary estimate, I like to recommend a discount to twenty %, down from the present egregious 70 %.
Now could be the time to confess that easy-money coverage and company bailouts—imposed within the identify of accelerating homeownership—has solely made housing extra unaffordable.
