Fed’s Barr Says Homeownership Affordability Has Fallen to a 21-Year Low

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Homeownership affordability has deteriorated to its weakest level in more than two decades, and Federal Reserve Gov. Michael Barr says the problem extends well beyond mortgage rates.

In a speech on housing affordability Wednesday, Barr cited the Federal Reserve Bank of Atlanta’s Home Ownership Affordability Monitor, which fell to 68 in July 2026—the lowest reading in 21 years. An index below 100 indicates that a median-income household cannot afford the median-priced home under the measure’s assumptions.

The number captures a housing market squeezed from several directions at once: home prices remain high, mortgage rates have climbed, insurance and property-tax costs have increased, and years of underbuilding have left many markets short of homes.

“This combination of high prices and high rates puts homeownership out of reach for many families,” Barr said.

The affordability problem predates today’s mortgage rate

Barr’s speech is notable because it separates the immediate pain of borrowing costs from the structural forces that have made housing expensive over a much longer period.

Between 2000 and 2024, inflation-adjusted median household income increased roughly 17%, while real U.S. house prices increased approximately 70%, according to figures Barr cited. In 2024, 68% of prospective first-time buyers surveyed by the Federal Reserve said they could not afford a down payment.

Mortgage rates compound that gap. Barr noted that roughly half of outstanding mortgages still carry rates of 4% or less and nearly 80% are below 6%. Owners holding those loans have a financial reason not to move into a market where a replacement mortgage would carry a substantially higher rate.

That lock-in effect suppresses listings as well as demand. In supply-constrained markets, Barr noted, fewer homes coming to market can put upward pressure on prices even as higher rates reduce the number of buyers able to transact.

WRE News reported this week that the 10-year Treasury yield moved above 5.05%, adding pressure to mortgage pricing. Freddie Mac’s latest weekly survey subsequently put the average 30-year fixed mortgage at 7.03%.

Barr points to a shortage measured in millions of homes

There is no single accepted estimate of the U.S. housing shortage. Barr cited research placing the deficit between roughly 2 million and 5.5 million units, depending on methodology and regional assumptions. Against a housing stock of about 150 million units, that represents approximately 1% to 4% of the total stock.

A shortage that looks relatively small as a percentage of all homes can still materially affect prices because functioning housing markets require vacant and available inventory.

Barr identified four broad forces behind the shortage: restrictive land-use and permitting rules; weak long-run productivity growth in construction; lasting damage to the homebuilding workforce and industry after the Great Recession; and post-pandemic increases in material, labor and other construction costs.

He cited Census Bureau data showing the constant-quality price index for new single-family homes increased roughly 40% between 2020 and 2025.

The labor shock following the housing crash was particularly severe. Barr said the number of new homebuilders fell from 98,000 in 2007 to 49,000 in 2012, while more than 30% of construction workers left the industry after the bust and another 25% either left the labor force or moved into informal work.

Renters are under pressure too

The affordability crisis is not limited to would-be homeowners. Barr said about half of renters are cost-burdened, spending at least 30% of income on rent, while roughly one-quarter spend at least half their income on rent.

The consumer price index for primary-residence rent in August was 34% higher than in December 2019, according to figures cited in the speech. Shelter inflation has slowed considerably from its 2022-23 pace, but the higher level of rents remains embedded in household budgets.

Barr’s analysis also emphasizes that lower-income households face a different scale of constraint. Increasing overall supply can relieve some pressure, but households with limited income and savings can remain unable to meet down-payment, deposit and monthly-payment requirements even in a better-supplied market.

What the Fed can—and cannot—do

The Federal Reserve influences mortgage rates through monetary policy, but it does not directly set mortgage rates. Longer-term Treasury yields, inflation expectations, investor demand, mortgage-backed securities pricing and other factors also affect what borrowers ultimately pay.

Barr said the Fed’s role is to pursue maximum employment and stable prices, adding that mortgage rates generally benefit when inflation is lower.

Many of the supply constraints he identified sit outside the Fed’s authority altogether. Zoning, permitting, land-use restrictions, construction productivity and local infrastructure decisions are largely matters for state and local governments and the private sector.

That makes the 21-year affordability low more than a rate story. Lower borrowing costs could improve monthly payments, but Barr’s analysis suggests that a durable improvement in affordability also requires more housing production, lower development friction and better alignment between household incomes and shelter costs.