American Dream of Buying a Home Is Just a Dream for Many, Real Estate Expert Says

The Federal Reserve's interest rate cut in September signaled that the inflation induced by COVID-19 is easing up. But just lowering borrowing costs is not enough to solve the housing crisis that most would-be buyers are weathering, said Jesse Saginor, associate professor of real estate development in the University of Maryland’s School of Architecture, Planning and Preservation.

“There is no silver bullet,” he said.

In 2013, half of all U.S. homes on the market were considered affordable (meaning housing expenses were no more than 30% of monthly income); by 2023, that number had plummeted to 16%. A dearth of housing stock, lower incomes and even pandemic migrations are all at play.

Below, Saginor breaks down four reasons why it’s harder to buy a home now than ever before:

We’re building plenty of housing—just the wrong kind. The proliferation of high-end apartment buildings around D.C. could make anyone question the reality of a housing shortage. But, Saginor says that the problem is that in many cities, what’s being built isn’t for the people who need housing, such as the restaurant workers or service people who work there. That pushes mid- to low-income earners further out of the city where prices are cheaper—and inadvertently fuels a longer commute. “It’s what contributes to congestion issues,” he said.

Incomes have not increased as fast as the cost of the average home. In 1985, the median home sale price was about $78,000, with the average income at $22,000. In 2023, home prices had surged to $433,000, but income had only risen to an average of $74,000, nearly doubling the effective cost of buying a house in that period. “People may be making more money, but the demand for housing has pushed the price up far beyond what it was even 10 years ago,” he said.

Affordable housing must be championed locally. Most affordable housing incentive programs are largely funded by the federal government, but programs are managed at the state, county, and city levels, Saginor said. Cities also have some sway in boosting the amount of affordable housing being built, from offering tax incentives to footing the bill for infrastructure, which defrays development costs.

The rub is that high-end development generates more property and income tax revenue than affordable housing projects—and that’s often the reason supply doesn’t match the demand for average earners. “Thirty percent of a city’s population may have jobs that fall within the affordability range,” he said.

High housing costs might not be enough to send people packing. Despite the growth of post-pandemic, online “work from anywhere” jobs, skyrocketing prices in cities like Washington, D.C., San Francisco and Boston might not be enough to send people to more affordable enclaves like Cleveland or Oklahoma City, said Saginor. People often stay in “sticky places”—high-priced cities where your income won’t go as far—for reasons not always easy to quantify, he said, such as family or cultural opportunities. “There hasn’t really been a great migration yet where we’re seeing people move back to the Midwest where it's more affordable,” he said. “There are aspects that policies are not going to be able to address because personal preferences outweigh them.”