Housing remains a key part of the U.S. economy, with spending on homes accounting for between 15% and 18% of the country’s gross domestic product (GDP). Real estate also represents the largest share of household assets, making homeownership an important factor in overall consumer wealth.
Home prices stabilized in some markets this year after several years of strong gains. Prices rose by 40% from June 2020 to June 2022, but only increased by about 8% from then through June 2025. A limited number of homes for sale had slowed market activity, partly because many homeowners were reluctant to sell and lose their lower fixed-rate mortgages secured before interest rates began rising in 2022. Over the past year, however, more homes have become available for sale.
Higher interest rates and elevated home prices have made affordability a challenge for buyers, resulting in higher monthly payments and dampening demand. At the same time, inflation-adjusted income growth and low unemployment have supported consumer confidence and housing market stability. The increase in housing supply over the last year has provided more choices for buyers and started to put downward pressure on closing prices.
“Since Covid, home price appreciation exceeded wage growth, making starter homes less attainable for young people,” says Bill Merz, head of capital markets research at U.S. Bank Asset Management Group. “Meanwhile, high borrowing costs make it difficult for existing homeowners to move, since their monthly payment would likely rise, even for an equivalent house.”
Looking ahead, there is potential that higher incomes and lower mortgage rates could help ease some of the strain caused by rising supply and ongoing affordability issues. “Fed rate cuts could help bring mortgage rates lower, although interest rates already price in expectations of some rate cuts,” says Merz. “If mortgage rates decline and real income growth remains healthy, it could support housing demand and help offset higher supply.”
For investors seeking opportunities related to elevated home equity levels across households nationwide, non-agency residential mortgage bonds are one option. These investments are not government-backed but offer higher yields compared to other fixed income securities; strong home equity provides significant collateral behind these bonds.
Recent trends show that houses are staying on the market longer and sellers are offering more price concessions. Sellers may need to allow extra time when listing properties and focus on pricing strategies. Buyers could benefit from greater negotiating power as inventory increases or if modest declines in mortgage rates improve affordability or boost purchasing power.
