“Existing-home sales increased by 1.7% month-over-month in February, according to the National Association of REALTORS® Existing-Home Sales report. The report provides the real estate ecosystem—including agents, homebuyers and sellers—with data on the level of home sales, price, and inventory.” NAR
It’s been months since I last wrote about the housing market, and why it’s had such a slow recovery. FRED’s 30-year fixed mortgage graph tells us why, which is why we have a housing shortage.
The 30-year average fixed rate mortgage was a level 3% until 2022, believe it or not, the result of four years of budget surpluses from 1996-2000 by the Clinton administration. It dropped again briefly during the COVID-19 pandemic until the Fed raised interest rates to combat rising inflation.
It’s 6.0% today, after dipping very briefly to 5.98% last month. The Clinton era was also the last time we had anything near a budget surplus because GW Bush launched his wars on terror in 2022 that had to be paid for with the Afghanistan and Iraq invasions.
How were the wars paid for? With money borrowed from US taxpayers because Bush Republicans had just passed another gigantic tax cut bill that led to our first $1 trillion federal debt.
The situation is the same today with Trump’s Iran war costing $1 billion per day on borrowed money, according to the Pentagon and others, which will add to the current $39 trillion in federal debt.
Are we seeing a housing revival with the slight uptick in existing home sales? Hope springs eternal, as the saying goes. Sales have hovered around 4 million residential units since the busted housing bubble and 2008-09 Great Recession. There has never been enough to satisfy the demand since then, because the housing bubble created an over spply of unsold housing, and 30-year fixed rate mortgages have hovered above 6% ever since, per the FRED graph.
But, “Housing affordability is improving, and consumers are responding,” said NAR Chief Economist Dr. Lawrence Yun. “Still, there is a long way to go to return to pre-pandemic levels of transaction activity. There are more than 6 million more jobs than in 2019, yet home sales per year are down by one million.”
There isn’t much of a housing supply inventory, and builders aren’t cooperating now with less than a four-month supply of existing home inventory on the market at the current slow sales rate.
This is while privately-owned housing starts in October were punk, at just a seasonally adjusted annual rate of 1,246,000. It is 4.6 percent below the revised September estimate of 1,306,000 and is 7.8 percent below the October 2024 rate of 1,352,000, says Calculated Risk.
Unaffordably high mortgage rates are one reason for the construction shortage, but Trump’s tariffs on building materials are also adding to construction costs.
Higher import taxes on steel, copper, lumber and other materials are lifting construction prices and interrupting some jobs. Immigration enforcement is worsening worker shortages and delaying projects.
“We get so many things thrown at us in the construction industry,” said Tony Rader, the chief relationship officer at National Roofing Partners, a commercial roofing company in Coppell, Texas. “It just seems like every time we turn around, we’ve got something else to fight.”
So, we must throw in the costs of empire building because Republicans are so fond of waging wars. It’s not only the Federal Reserve keeping rates high, but also the huge federal debt has been boosting bond yields. It is the reason we still have a housing shortage of 2-5 million units, depending on who you ask, since the Great Recession and housing bubble.
Harlan Green © 2025
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