Mariam Mahmoud

U.S. President Donald Trump and the Federal Housing Finance Agency have issued directives to the government-sponsored <a href="https://www.marketplace.org/story/2026/01/15/what-happens-if-fannie-mae-buys-up-mortgagebacked-securities" rel="noopener noreferrer" target="_blank">enterprises that purchase mortgage-backed securities</a>, raising concerns over the possible emergence of a new mortgage-finance crisis. At the same time, another view rules out the likelihood of a full-scale housing crisis, arguing that the current problem is primarily linked to declining housing affordability rather than to a broad-based credit crisis. While the U.S. administration seeks to reduce mortgage-financing costs and encourage homeownership, these efforts are constrained by a shortage of housing supply and expectations of rising long-term interest rates, which are themselves influenced by the growing U.S. public debt burden and concerns over inflation.Mixed IndicatorsConditions in the U.S. housing market reflect a set of mixed economic indicators, the most notable of which are as follows:1. Rising Home Prices Amid Insufficient Supply: The growth of single-family home prices in the United States slowed in January 2026, recording an annual increase of only 0.7%, compared with 3.5% in January 2025. By January 2026, <a href="https://finance.yahoo.com/personal-finance/mortgages/article/when-will-the-housing-market-crash-again-170038789.html?guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAGDSkBtFCZM1TBBB39j1EV9WloEAdVXqlZvx5vO06FiQJ24sLBOLxPSQyr489KbZhg2nR74y_G6OGvsKijAAwld_VsSZSAY5Hqlaffxs16eabcDihsfA4fQbYpEzR24ao_K3zqTE2TjfaxK2W7yGVSAlXDPxaA3QTqMukfZYrG5C&amp;guccounter=2" rel="noopener noreferrer" target="_blank">housing supply was sufficient</a> for only 3.7 months, whereas market balance is generally achieved when housing inventory is sufficient to meet demand for six months.In <a href="https://theconversation.com/the-housing-crisis-is-forcing-americans-to-choose-between-affordability-and-safety-266136" rel="noopener noreferrer" target="_blank">California</a>, for example, the median home price reached $906,500. The annual income required to qualify for a mortgage on a median-priced home rose to approximately $237,000 in June 2025—more than double the state’s median household income. While California aims to build 2.5 million new homes by 2030, which would require the addition of 350,000 units annually, it added only around 100,000 units in 2024.2. Sharp Decline in Housing Affordability: The <a href="https://www.atlantafed.org/research-and-data/data/home-ownership-affordability-monitor#panel=1" rel="noopener noreferrer" target="_blank">housing affordability index issued</a> by the Federal Reserve Bank of Atlanta declined from 106.7 points in February 2020, before the outbreak of the COVID-19 pandemic, to 72 points in December 2025 and 73 points in January 2026. A reading below 100 indicates that housing is unaffordable; the lower the index, the weaker households’ ability to bear housing costs.3. Higher Rent Burdens Among Low-Income Groups: The <a href="https://www.oecd.org/content/oecd/en/data/datasets/oecd-affordable-housing-database.html" rel="noopener noreferrer" target="_blank">share</a> of low-income renters in the private rental sector who spend more than 40% of their income on rent reached approximately 58.84% in 2024. This is partly attributable to rising demand for rental housing amid the declining ability of this segment, as well as middle-income groups, to purchase homes. Turning renters into homeowners would therefore require a meaningful decline in housing costs.In this context, some analyses <a href="https://www.reuters.com/business/finance/us-mortgage-lenders-rally-trump-administrations-plan-buy-200-billion-bonds-2026-01-09/" rel="noopener noreferrer" target="_blank">estimate that mortgage rates</a> would need to fall and stabilize at roughly 5% to 5.9% in order to improve affordability, attract consumers to the homeownership market, and stimulate home sales.4. Growth in New Mortgage Originations in the United States: Indicators from the U.S. <a href="https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2025Q4" rel="noopener noreferrer" target="_blank">mortgage-credit market</a> show that mortgage balances recorded in consumer credit reports increased by $98 billion during the fourth quarter of 2025, reaching $13.17 trillion by the end of December 2025.Home equity line of credit balances also rose by about $12 billion, marking the fifteenth consecutive quarterly increase, to reach $433 billion—an increase of $116 billion over the low recorded in the first quarter of 2022. Meanwhile, new mortgage originations rose to $524 billion in the fourth quarter of 2025, compared with $512 billion in the preceding quarter, reflecting continued activity in mortgage finance.5. Growing Concern Over Early Mortgage Delinquency: Transitions into early-stage mortgage delinquency have risen slightly among mortgage borrowers, indicating a modest increase in the number of individuals who had previously been current on their <a href="https://www.cotality.com/press-releases/u-s-mortgage-delinquency-rate-finishes-2025-flat-year-over-year" rel="noopener noreferrer" target="_blank">mortgage payments</a> but recently fell behind for the first time. This comes despite the broader stability of delinquent mortgages at 3.2% in 2025, including all stages of delinquency, from one missed payment to foreclosure. Nevertheless, the delinquency rate in December 2025 remained far below the peak of 12% recorded in 2010.In the fourth quarter of 2025, 58,000 individuals received foreclosure-initiation notices due to missed mortgage payments, compared with <a href="https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2025Q3" rel="noopener noreferrer" target="_blank">55,000</a> in the preceding quarter. These figures reflect a combination of continued financing flows and a limited rise in credit pressures, suggesting that the market may face mounting strains. They also fuel concerns over a possible increase in foreclosure notices and the entry of new segments of borrowers into the pool of those struggling to service their mortgages, alongside the growing volume of outstanding mortgage debt.6. Lower Mortgage Prepayment Probabilities: Mortgage prepayment probabilities typically rise when interest rates fall, as borrowers may turn to refinancing or repaying their loans early, thereby reducing the expected returns of investors and mortgage-finance institutions.However, these <a href="https://www.schwab.com/learn/story/understanding-mortgage-backed-securities-investing" rel="noopener noreferrer" target="_blank">probabilities</a> remain relatively limited, according to indicators from March 2026, as a wide segment of American homeowners still hold loans fixed at historically low interest rates. This reduces incentives for large-scale refinancing or early repayment. Mortgage-finance institutions view prepayment as a financial risk because it reduces the profits they would otherwise expect if borrowers continued servicing their debts under the agreed repayment schedule and interest terms.Government InterventionsA number of U.S. government interventions seek to address housing and homeownership issues in the United States, but these efforts are simultaneously constrained by the economic repercussions of other government policies, as follows:1. Presidential Emphasis on Prioritizing Homebuilding for Individuals: President Donald Trump brought mortgage finance back to the forefront during the World Economic Forum meeting in Davos, Switzerland, in January 2026, when he stressed <a href="https://rooseveltinstitute.org/blog/the-trump-administration-wants-to-turn-the-housing-crisis-into-a-retirement-crisis-too/" rel="noopener noreferrer" target="_blank">the need to provide affordable housing</a> and argued that priority should be given to building homes for individuals rather than corporations. As the November 2026 midterm elections approach, housing has shifted from being merely an economic issue to becoming a political and social one as well.At the same time, concerns persist that the administration’s efforts to lower the cost of homeownership by focusing on reducing mortgage interest rates—without sufficient regard for financing and regulatory risks, and in the absence of increased supply—could trigger a crisis in the sector.2. A Presidential Directive to Inject $200 Billion to Lower Mortgage Costs: In January 2026, President Donald Trump directed the two U.S. <a href="https://www.marketplace.org/story/2026/01/15/what-happens-if-fannie-mae-buys-up-mortgagebacked-securities" rel="noopener noreferrer" target="_blank">mortgage-finance giants</a>, Fannie Mae and Freddie Mac, to purchase $200 billion worth of mortgage-backed securities and use their available liquidity to lower mortgage interest rates, reduce monthly payments for homebuyers, generate an immediate market impact, <a href="https://www.foxbusiness.com/media/fhfa-chief-says-trump-deployed-200b-slash-mortgage-rates-impact-immediate" rel="noopener noreferrer" target="_blank">enhance the stability of the mortgage-bond market,</a> and ease pressures on buyers.While the two institutions increased their mortgage-backed securities holdings by more than $90 billion in 2025, this directive would raise the size of their combined portfolios to $450 billion, equivalent to 4% of the total mortgage-backed securities market. Accordingly, the impact of this step on lowering mortgage rates may <a href="https://www.ft.com/content/8f4ca4fa-f16b-4e4f-b93a-9524ef0726b8" rel="noopener noreferrer" target="_blank">remain limited.</a><a href="https://www.ft.com/content/8f4ca4fa-f16b-4e4f-b93a-9524ef0726b8" rel="noopener noreferrer" target="_blank">Warnings</a> have also emerged regarding the risks of returning to this "high-risk" model, which is widely seen as having contributed to the 2008 financial crisis and nearly pushing both institutions to the brink of collapse. Such a move could fuel housing-price inflation and increase the likelihood that the two companies would face renewed difficulties, thereby exposing taxpayers and the financial system to risk, while also undermining the administration’s plans to proceed with the public listing of the two institutions.3. Measures to Increase Supply and Curb Institutional Ownership of Homes: The U.S. administration is also working to implement <a href="https://www.foxbusiness.com/media/fhfa-chief-says-trump-deployed-200b-slash-mortgage-rates-impact-immediate" rel="noopener noreferrer" target="_blank">additional policies</a>, including limiting institutional ownership of homes in order to help lower housing prices, and coordinating with real estate developers to increase the supply of housing units. These efforts form part of a broader push to transform the United States into a nation of homeowners rather than renters.4. Housing Supply Hit by Tariffs and Migrant Deportations: One line of analysis holds that policies intensifying the deportation of undocumented migrants reduce the workforce available to the construction sector. At the same time, estimates suggest that higher <a href="https://theconversation.com/the-trump-administrations-anti-immigrant-housing-policy-reflects-a-long-history-of-xenophobia-in-public-housing-263860" rel="noopener noreferrer" target="_blank">tariffs</a> on construction materials have raised building costs by $10,900 per home. This underscores the need to address the factors affecting both supply and demand, rather than stimulating demand alone.Possible ScenariosCurrent indicators in the U.S. housing market point toward one of the following scenarios:1. Continued Housing Pressures Without Sliding into a Full-Scale Crisis: This appears to be the most likely scenario based on current data, particularly given the growth in mortgage balances, the increase in new originations, and the relative stability of delinquency and foreclosure rates at levels above those seen in earlier periods, while remaining below the peaks recorded during the global financial crisis.Analysts argue that the current U.S. housing-market problem is primarily tied to price levels and limited supply, rather than to credit and financing policies. This is also reflected in the decline in the share prices of credit-scoring companies linked to mortgage lending activity, such as Fair Isaac and Equifax, from the end of 2025 through March 12, 2026—an indication of renewed expectations of slower credit demand associated with the housing market.2. A Temporary and Limited Decline in Mortgage Financing Rates: Data from Freddie Mac show that <a href="https://www.mortgagenewsdaily.com/mortgage-rates/freddie-mac" rel="noopener noreferrer" target="_blank">fixed mortgage rates</a> stood at 5.44% and 6.15% for 15-year and 30-year terms, respectively, at the end of December 2025, before edging slightly to 5.5% and 6.11% on March 9, 2026. This suggests the limited effectiveness of the measures adopted by the U.S. administration.<a href="https://www.investing.com/indices/phlx-housing-historical-data" rel="noopener noreferrer" target="_blank">The Philadelphia housing-sector index</a>—which reflects the performance of U.S. companies linked to the housing sector, including homebuilders, some building-materials firms, and real estate-services companies—rose by 8.9% between December 31, 2025, and February 27, 2026, climbing from 664.29 points to 723.09 points, before later falling to 630.22 points on March 12, 2026, amid the repercussions of the Middle East crisis.Similarly, <a href="https://www.investing.com/indices/msci-us-reit-historical-data" rel="noopener noreferrer" target="_blank">the MSCI U.S. REIT Index rose</a> by 10.9% over the same period to reach 1431.45 points, before declining to 1385.29 points on March 12, 2026. This trajectory points to a wave of optimism that prevailed in the U.S. housing sector at the beginning of 2026, driven by expectations of improved mortgage financing, followed by a correction in March 2026 as uncertainty returned over demand for mortgage credit and the direction of interest rates.3. Worsening Housing Pressures Due to Structural and Financial Factors: This scenario is based on concerns that the administration may focus too heavily on lowering mortgage costs, thereby disrupting the balance between supply and demand, especially given indicators suggesting that the high cost of mortgage finance is partly attributable to supply shortages.U.S. home prices are likely to remain hostage to structural factors that extend beyond financing costs to include inadequate supply. These factors include zoning restrictions, local opposition to increasing housing supply in or near high-priced areas, and market speculation that has turned housing into a financialized market in several cities, amid accusations that federal government incentives for public-housing construction remain insufficient.4. Reduced Government Capacity to Carry Out Meaningful Interventions: This <a href="https://siepr.stanford.edu/publications/policy-brief/abcs-gses-how-changes-fannie-and-freddie-could-impact-mortgage-rates-and" rel="noopener noreferrer" target="_blank">scenario</a> is linked to the future of Fannie Mae and Freddie Mac and their pivotal role in the U.S. housing system, given that they hold mortgage-related portfolios worth around $6.5 trillion. If the two institutions were to exit government conservatorship and the implicit government guarantee were removed as part of privatization and public-listing plans, the federal government would lose an important part of the tools it uses to regulate the market, respond to instability, and reduce the cost of financing and mortgages—especially during crises that require financial intervention.5. Rising Investment Risks for Fannie Mae and Freddie Mac: There are concerns over moves to increase Fannie Mae’s and Freddie Mac’s holdings of mortgage-backed securities in line with federal directives, as was the case before the global financial crisis, and to remove existing limits on portfolio size in order to keep mortgage rates low, despite the resulting implications—most notably the rise in investment risks facing the two institutions.Global RepercussionsIn conclusion, the U.S. mortgage-finance market remains the focus of broad attention because of its far-reaching impact on banks, financial markets, and the global economy. Investors around the world closely monitor the U.S. mortgage market as one of the vital indicators shaping global financing and investment trends. The effects of this market are not confined to the domestic U.S. sphere; they also extend to external markets by raising the cost of external borrowing, affecting asset valuations, and shaping investors’ appetite for real estate assets and equities.

Is the United States Heading Toward a Housing Crisis?