What's Going On With Housing?

The prices and affordability of housing have received enormous attention during the last couple of years.

Apollo Global Management recently released a voluminous report on the U.S, Housing Outlook, January, 2026 which contains over 100 charts and graphs to provide context on what's going on with housing.

I have selected a few charts and graphs from the report that I found particularly interesting and enlightening.

The traffic of potential homebuyers is near 40 year lows. 

The only other sustained period when potential homebuyers were lower was in the Great Recession Period of 2008-2012.

A major reason for the weak demand is housing affordability.

However, what is interesting in looking at the data, if it were not for the improvement in housing affordability during the decade between 2009-2019 (driven by ultra low interest rates), I don't believe this would be the issue it is in the media and with young people

In fact, housing affordability was much worse in the early 1980's when 30 year mortgage rates surged as high as 18% in October, 1981.

Right now housing affordability is about the same as it was in the 20 years between 1989 and 2009.

A big reason for the low traffic in prospective homebuyers is that first-time buyers are largely absent from the market, 

The number of first-time buyers has declined from 40% in 2004 to 20% today.

At the same time, the median age of first-time buyers has increased from age 30 in 2008 to 40 today.

The median age of all homebuyers is now 59 meaning half of all buyers are 60 or older.

It was 31 in 1980!

The share of those with ultra-low mortgage rates below 3% has been declining in recent years as interest rates have risen.

There are now as many homeowners with 6% or higher mortgage rates as those with sub 3% rates.

The chart below shows how short-lived most mortgages are.

On paper, most mortgages are for 30 years but most last no longer than 7 or 8 years.

The chart title below is not as accurate as it should be.

In reality, 63% of all mortgages outstanding today were issued in 2019 or later.

This is despite the fact that 95% of mortgages outstanding today in the United States are 30 years.

It seems that very few people are taking the advice I gave my children---get a 15 year mortgage. 

You will save a ton of interest over the life of the mortgage!

Here are some typical mortgage amortization in other countries.

It blows my mind that some mortgages in Sweden can be up to 105 years!

Trump's proposal to create 50 year mortgages does not look quite so crazy with that context in mind.

Source: Grok

It should be noted that 40% of all homes in the United States are not subject to a mortgage today.

That percent has been steadily increasing with the aging of Baby Boomers.

Boomers paying down mortgages and increasing home values has resulted in owner's equity in real estate increasing by almost $25 trillion over the last 10 years.

The inventory of homes for sale has improved since 2022 but is still well below historical averages.

This apparently is a function of the number of homeowners who have low rate mortgages who do not want to sell and face the prospect of a higher rate but also the fact that there has been an ongoing structural decline in those moving each year.

In the mid-1980's about 20% of the population moved each year.

That number is now under 8%.

The increase in home values and mortgage rates has resulted in it being more financially advantageous today to rent versus owning a home.

 

Rents may soon be getting even more attractive as the current national apartment vacancy rate is the highest it has been in the last 10 years.

Credit for this is due to increased apartment construction with an assist from immigration easing demand pressure on apartment rents.

Those factors do not seem to be in play in Manhattan where residents now face a median monthly rate of $4,750 per month.

That is an increase of about 60% since November, 2020.

It will be interesting to see how this number evolves during the administration of Mayor Mandami.

He might get that rent number down but more likely than not it will be due to the law of unintended consequences.

Where are housing prices headed?

A lot of this depends on where you live.

The West, the East Coast and parts of Florida and Texas have the highest median prices and would seem to be most vulnerable to price compression over the next year.

Driven by price reductions in these areas it would not surprise me to see national median home prices  come down 10% or so over the next year to get us back within historical trends.

This chart shows how far home prices have gotten above historical trends.

Notice how home prices really spun out of control right after the Federal Reserve initiated quantitative easing policies in response to the Great Recession (2009-2012) and again with the money printing in response the Covid Pandemic (2000-2022).

In my view this is the primary reason that housing prices soared.

Too much easy money chasing a limited supply of housing.

This was exacerbated by the flood of illegal immigrants beginning in 2021 that increased overall demand for housing.

You simply could not bring in over 10 million people in a short period of time that needed shelter without having an adverse effect on housing costs (rents and, and by extension, home prices).

The biggest factor that potentially could prevent a decline in house prices in the near term is the fact that there is sizeable population of those in their 30's that are potential first time home buyers.

Demographics is providing a nice tailwind in the near term for housing demand and potential protection against falling prices.

However, as the Baby Boomers age out, more and more housing supply will become available.

This suggests to me that the long-term appreciation on residential real estate will be much harder to come by looking to the next decade and beyond.

I would expect to see home prices to be well within the historical trend channel by that time.

We will see it sooner if we experience an economic recession of some magnitude in the interim.

What goes up, can come down.

That may be truer today regarding housing prices than it has been in a long time.