Page 28 - BusinessWest November 24, 2025

Finding a Way Home
Housing Affordability Remains a Thorny Problem
BY JEFFREY LIGUORI
In many ways, the U.S. economy is still dealing with the effects of the global
financial crisis of almost two decades ago. It was a massive reset of our
entire financial system, with one segment, residential real estate, still
evolving from that disruption.
The boom of housing and real estate prices, exacerbated by exotic deriva-
tive investment vehicles tied to mortgages of borrowers with poor credit,
led to an historic bust in the real estate industry. Following the crash, banks
significantly tightened up their lending standards, and home building, illus-
trated by housing starts, collapsed as demand for new homes evaporated.
Consider this: the number of new housing units rose from roughly 1.65
million to a peak of 2 million per year from 1999 to 2005 before contracting
to fewer than 500,000 in 2009. By contrast, the number of 20- to 30-year-
olds in the country, the typical first-time homebuyer, which drives much of
the market, increased from 72 million to 78 million from 1990 to 2000. And
while that is a modest increase of about 8% over a decade, the growth in
that cohort of the population grew by nearly 40% in the prior decade, from
1980 to 1990.
The combination of population growth and a booming economy prior
to 2007 worsened the housing availability issue, which was already run-
ning short of demand. The economic downturn simply put that supply and
demand imbalance on hold. Until COVID.
Today, housing affordability remains a significant problem. COVID stimu-
lus and the shift to remote work caused demand to surge, driving up prices.
When the Fed raised rates to fight inflation from 2022 to 2024, mortgage
costs climbed rapidly, and higher rates reduced the number of homeowners
willing to sell or upgrade. Contrary to economic theory, supply shrank while
demand stayed high, putting home ownership out of reach for many.
Individuals and families at the lower end of the economic scale are at a
greater disadvantage, consistent with our bifurcated economy, as illustrated
here:
CITY
MEDIAN HOME
PRICE 2018
MEDIAN HOME
PRICE 2025 $ INCREASE % INCREASE
BOSTON $730,000 $800,000 $70,000 10%
WORCESTER $320,000 $443,700 $123,700 39%
SPRINGFIELD $180,000 $285,000 $105,000 58%
Recently, President Trump proposed the idea of a 50-year mortgage
as a solution to the housing affordability problem. The concept may have
originated from Bill Pulte, director of the Federal Housing Finance Agency
(FHFA), who has strong ties to the homebuilding industry. Pulte’s grandfa-
ther, William Pulte, founded Pulte Homes, now the third-largest home build-
er in the U.S., with annual sales exceeding $17 billion.
The FHFA is central to residential real estate as an overseer of the mort-
gage market and conservator of Fannie Mae and Freddie Mac, which pro-
tects taxpayers and maintains the stability of the housing finance system.
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