Harvard’s Housing Market Study Flags Worrying Trends—’Shocking’

The housing affordability crisis that has been keeping the dream of homeownership out of reach for millions of Americans over the past few years is unlikely to ease “anytime soon,” according to a new report by the Joint Center for Housing Studies of Harvard University.

The State of the Nation’s Housing 2025 found that sky-high home prices—which are still rising at the national level—historically elevated mortgage rates, and rising home insurance premiums and property taxes are still keeping Americans on the sidelines of the market, despite growing inventory.

The result is that sales are falling across the country as many Americans cannot afford to buy a property. While experts believe these dynamics will bring down home prices by the end of the year, Harvard researchers said, “The increasing possibility of an economic downturn threatens to deepen these challenges.”

Challenges Still Facing Homeowners in 2025

Home Prices

As of early 2025, U.S. home prices were 60 percent higher than they were in 2019, before the pandemic homebuying frenzy spurred by historically low mortgage rates began. The prices were not only significantly higher than before the health emergency but were also still rising at a rate of 3.9 percent year over year, according to the Harvard study.

In 2024, the median price of an existing single-family home hit a new high of $412,500. As of May 2025, according to the latest Redfin data, it was $441,738, up 1 percent from a year earlier.

“This is a shocking five times the median household income,” Daniel McCue, a senior research associate at the Joint Center for Housing Studies, said in a news release. “This is also significantly above the price-to-income ratio of 3 that has traditionally been considered affordable.”

While prices have continued rising this year, existing-home sales dropped to a new 30-year low of 4.06 million, the study found.

Rising Property Taxes and Home Insurance Premiums

It isn’t only sky-high home prices that are keeping prospective buyers off the market. The cost of homeownership has increased dramatically over the past few years as property tax bills have risen as a result of skyrocketing home values, and home insurance premiums have climbed following the increased frequency and severity of natural disasters across the country.

Home insurance premiums jumped 57 percent from 2019 to 2024, according to the Harvard study, “with the sharpest increases in areas with the greatest risk of a climate-related disaster.” Property taxes also climbed nationwide by an average of 12 percent between 2021 and 2023.

Consequently, a growing number of Americans homeowners are cost-burdened, meaning they spend more than 30 percent of their income on housing costs.

In 2023, according to the Harvard study, the number of cost-burdened homeowners rose by 646,000 to 20.3 million, representing 24 percent of all homeowner households.

Mortgage Rates

Historically high mortgage rates are also discouraging buyers from making a purchase this year.

Last year, according to the Harvard study, monthly mortgage payments on a median-priced home for first-time buyers with a 30-year loan rose to $2,570. That is 40 percent higher than it was in 1990, requiring buyers to earn an annual income of at least $126,700 to afford a home and the associated taxes and insurance costs, researchers found.

“Only 6 million of the nation’s nearly 46 million renters can meet this benchmark,” Alexander Hermann, a senior research associate at the Harvard center, said in a news release.

The situation is unlikely to change this year or the next. As of June 18, the nationwide average 30-year fixed-rate mortgage was 6.81 percent, according to Freddie Mac, more than three times higher than the lows reached during the pandemic. Experts believe mortgage rates will keep hovering between the 6 percent and 7 percent marks throughout 2025 and 2026.

The Number of Americans Reaching Homeownership Has Shrunk

With the long-standing affordability issues weighing on prospective buyers, the number of Americans who can realize their dream of homeownership is shrinking.

Last year, the U.S. homeownership rate fell for the first time in eight years, down 0.3 percentage points to 65.6 percent. The rate has continued falling in the first quarter of 2025, sliding to 65.1 percent.

The situation is even more dire among first-time homebuyers. The homeownership rate dropped by 1.4 percentage points in 2024 for households under the age of 35 and by 0.8 percentage points to 61.8 percent for households aged 35 to 44, according to the Harvard study.

In the same year, homeownership rates for households aged 45 and above remained relatively unchanged.

An Uncertain Future

The future of the U.S. housing market is “inextricably linked” to that of the country’s economy and federal policy, Harvard researchers said, adding, “As such, much of its future is uncertain.”

President Donald Trump’s tariffs on the U.S.’s trading partners, many of which affect crucial construction material, are bound to bring up the cost of building a home, builders and experts have said. The cost of building materials went up by 36 percent between February 2020 and February 2025, the Harvard study found, and it is likely to continue surging in the coming months. Estimates show that the Trump administration’s tariffs may add $12,800 to $25,500 to the cost of building a new single-family home.

Homebuilders surveyed by the National Association of Home Builders said they expected tariffs to push up new home prices by $10,900.

Trump’s aggressive stance against illegal migration could also exacerbate labor shortages in the construction sector, further increasing the cost of homebuilding. About one-third of construction workers are foreign-born, the Harvard study found—about twice the rate of the overall labor force.

On top of these issues, reductions in federal staff and funding threaten to exacerbate an already-unprecedented housing crisis, the study concluded.

“There must be a concerted effort to do more to address the affordability and supply crises,” Chris Herbert, the managing director of the Harvard center, said in a news release. “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.”