According to a new report, The State of the Nation’s Housing 2025 from the Harvard Joint Center for Housing Studies, record-high home prices and elevated interest rates have reduced U.S. homebuying to its lowest level since the mid-1990s.
Insurance premiums and property taxes are also on the rise, as high rents have left record numbers with cost burdens and have contributed to a rise in homelessness; and devastating wildfires have highlighted the growing dangers of climate disasters. Amid concerns about diminished federal support, state and local governments are ramping up efforts to tackle the affordable housing crisis, but the increasing possibility of an economic downturn threatens to deepen these challenges.
“There must be a concerted effort to do more to address the affordability and supply crises,” said Chris Herbert, Managing Director of the Harvard Joint Center for Housing Studies. “The potential consequences of inaction are simply too harmful to the macroeconomy and the millions of households striving for a safe, affordable place to call home.”
The following are some takeaways from the The State of the Nation’s Housing 2025:
Renter Cost Burdens Hit Record High
The report found that, for the third consecutive year, in 2023, the number of cost-burdened renters (those spending more than 30% of their income on housing and utilities) reached a record high at 22.6 million renters (50%). This total includes more than 12.1 million (27%) who are severely burdened, spending more than half of their income on housing. While households with lower incomes constitute the bulk of burdened renters, the strain is creeping up the income ladder: burden rates were over 70% for renters earning $30,000 to $44,999 and rates doubled to more than 45% for renters earning $45,000 to $74,999.
Rising Costs Encumber Homeowners, as Insurance and Property Taxes Continue to Increase
Homeowners are increasingly burdened by rising housing costs as well. In 2023, the number of cost-burdened homeowners rose by 646,000 to 20.3 million, accounting for 24% of all homeowner households. The rising costs are partially explained by increases in insurance premiums and property taxes. The report found that home insurance premiums jumped 57% from 2019 to 2024, with the sharpest increases in areas with the greatest risk of a climate-related disaster. The scale and frequency of climate disasters has prompted private insurers not only to raise premiums, but in some cases to reduce coverage or pull out of markets entirely, as in California, Florida, and Louisiana. Property taxes also increased an average of 12% between 2021 and 2023.
As Home Prices Grow, Sales Drop to 30-Year Low
As of early 2025, home prices are up 60% nationwide since 2019, and still rising at a rate of 3.9% year-over-year. Consequently, the median existing single-family home price hit a new high of $412,500 in 2024.
“This is a shocking five times the median household income,” said Daniel McCue, a Senior Research Associate at the Center. “This is also significantly above the price-to-income ratio of three that has traditionally been considered affordable.” As prices rose, existing home sales dropped to a 30-year low.
Builders Respond With Smaller Homes and Rate Buydowns
New home sales, however, increased by 3% last year. Contending with the same affordability pressures as existing-home sellers, many builders responded by producing homes that were smaller, or had fewer amenities. The median size of a new single-family home declined for the third consecutive year in 2024, and many builders cut prices or offered mortgage rate buydowns to facilitate sales.
Homeownership Rate Falls as Barriers Rise
Last year, monthly mortgage payments on the median-priced home rose to $2,570, under terms typical to first-time homebuyers (a 30-year loan with a 3.5% downpayment). This mortgage payment is 40% higher than it was in 1990, and a buyer would need an annual income of at least $126,700 to afford it, and the associated taxes and insurance costs.
“Only six million of the nation’s nearly 46 million renters can meet this benchmark,” said Alexander Hermann, a Senior Research Associate at the Center. “Amid this, the U.S. homeownership rate fell in 2024 for the first time in eight years.”
Additionally, the difference between white and Hispanic homeownership rates inched up to 25.2 percentage points in 2024, while the white-Black gap remained at 27.7 percentage points.
Rental Demand Remains Strong
As fewer households have been able to become homeowners, the renter population has grown, jumping by 848,000 in 2024. This demand is absorbing the wave of new multifamily rental units: in 2024, multifamily developers completed 608,000 new units, the most in nearly four decades. However, much of this construction was at the upper end of the market; the number of higher-rent units has increased dramatically while the number of lower-rent units has fallen substantially.
Reductions in Federal Supports Put Households at Risk
Proposed reductions in federal resources for crucial housing support comes at a time of record-high homelessness. In January 2024, fully 771,480 people were homeless, a 33% increase since January 2020. Some places, including Houston and Milwaukee County, have successfully reduced homelessness using housing first principles, a strategy that houses individuals and then provides supportive services to address other needs, but delayed grant disbursements to homeless services providers are threatening this work.
“Looking forward, state, and local governments will undoubtedly play a larger role in addressing record-breaking housing needs as the federal government contemplates the withdrawal of vital supports,” said the report. “Continued innovations by state and local governments regarding housing policies, regulations, and financing models will help.”
Tariffs, Reduced Immigration, and Diminished Federal Support Cloud the Future
The outlook for housing is inextricably linked to that of the economy and federal policy. As such, much of its future is uncertain. Homebuilders estimate that the newly imposed tariffs on construction materials will increase new home prices by $10,900 apiece, and reduced immigration could shrink the already-reduced labor pool. Roughly a third of construction workers are foreign-born, about twice the rate of the overall labor force. Additionally, reductions in federal staff and funding threaten to exacerbate an already-unprecedented housing crisis.
Click here to access the full State of the Nation’s Housing 2025 report.
