Reality Check Hitting the U.S. Housing Market

For the past few years, people have been told the housing market is “short on homes,” but that doesn’t really hold up. The truth is, we didn’t run out of houses, we just misused a lot of them. Too many properties ended up as investment plays, second homes or short-term rentals, leaving everyday buyers chasing listings that don’t match their income. Builders added fuel by overproducing luxury homes and speculative builds while the middle market (those homes most families could actually afford), lagged behind.

Now, as mortgage rates wobble, the market is showing its cracks. A dip in rates doesn’t always send prices higher. Instead, it can lure more owners to finally list, which increases supply and pushes prices down. We’re already seeing that play out with motivated sellers who are starting to look more like distressed sellers, especially in the luxury market where inventory sits longer and price cuts keep stacking up.

Behind the scenes, non-bank mortgage lenders are carrying more risk than most people realize. These companies rely on constant loan sales and borrowed cash to function and when delinquencies rise or buyers pull back, their liquidity gets squeezed. That stress has the potential to ripple outward, tightening credit and forcing more homes back on the market.

Step back and it’s clear housing has been financialized just like office buildings and commercial space. Homes became chips in a larger game of speculation and securitization rather than stable places for families. Meanwhile, demographics are shifting older, family sizes are shrinking and younger buyers are priced out. Unless incomes rise significantly, home prices will need to settle closer to what median households can realistically afford, which is somewhere in the $250,000 to $300,000 range.

I’d say the slowdown isn’t about a shortage at all, it’s about affordability finally catching up to reality. Sellers who cling to yesterday’s price tags will struggle, while buyers who stay patient may find better opportunities ahead. The market is shifting back to where paychecks, not hype, set the tone.

Source Inspiration: Melody Wright with Haringa