Shelter increased by 0.4 percent in December’s Consumer Price Index published by the U.S. Bureau of Labor Statistics, or at a 3.2 percent pace the past 12 months. The news comes as home prices continue to register at all-time highs, with the median home price currently at $422,000, according to a Dqydj.com analysis of National Association of Realtors, Case-Shiller and FHFA NSA Existing Home Sale Index data.
Simply put, home prices have never been so high. For homeowners, that’s great, but for prospective homebuyers, it means the American dream of home ownership for many remains elusive.
The last time housing was this unaffordable was in 2006, right before the housing market crashed. Then, household median income according to the U.S. Census Bureau was $48,200 and the median home price was $213,706 — with income at 22.5 percent of home prices.
That’s an increasingly deteriorating situation financially for American families. Look at the 1980s: In 1984, household median income was $22,420 and the average price for an existing home was $67,000, with income accounting for 33 percent of home prices. Shelter was a lot more affordable back then.
In the housing market crash, by 2011, it had reverted closer to its 1984 level: Median income was $50,050 but the average home price had collapsed to $172,072 — with income 29 percent of home prices.
But look at what it took to get there. A massive crash, a financial crisis for banks and 8 million Americans lost their jobs in one of the worst recessions in modern history.
Right before Covid, in 2019, it wasn’t so bad: Median income was $68,700 and the average home price was $260,772 — with income 26.3 percent of home prices.
And in 2024, household median income was $83,730 and the average price of an existing home is $411,000 — with income at 20.3 percent of home prices. Unaffordability and inflation was one of the major reasons former President Joe Biden and former Vice President Kamala Harris lost the election.
Besides boosting homebuilding — housing starts were unfortunately down to just 1.2 million annually in October 2025, a three-year low — one item that has been wielded by the Federal Reserve since the housing crisis of the late-2000s to influence home prices has been to purchase mortgage-backed securities.
In 2006, home prices peaked at about $216,000 and crashed during the financial crisis to a $169,000 by 2012, a 21.7 percent drop, creating a negative equity situation that perversely incentivized Americans to default on their mortgages, exacerbating the problem as demand collapsed.
So, then-Federal Reserve Chairman Ben Bernanke undertook a new program to purchase mortgage-backed securities to take the housing off of the books of the banks and to clean up the mess. The Fed purchased $1.1 trillion off the bat, sold some, but resumed buying again in 2012, and home values finally took off again — and never really stopped.
By 2016, the Fed was up to $1.7 trillion mortgage securities held, home prices continued appreciating and only began unwinding in 2018 until the 2020 Covid recession. And then, inexplicably in hindsight, the Fed resumed buying mortgage securities again peaking at $2.7 trillion in 2022, and prices skyrocketed.
Then, the Fed did not begin unwinding until 2022, and is now down to $2 trillion. It’s still a lot. Fortunately, price increases have slowed down while the Fed has been unwinding its housing portfolio.
Which is why the Fed should keep dumping the mortgage securities. It doesn’t need them, the housing market doesn’t need the Fed to still hold onto them — there is no negative equity crisis right now — and young Americans who want to buy their first home actually really need prices to stay flat so their incomes have a chance to catch up.
Just think, a 20 percent down payment on the current median priced home would be more than $80,000. Who’s got that kind of money lying around? Rich people, that’s who. And they’re not rich.
Now, there is a cost to the Fed selling the mortgage securities, which is a slight increase in mortgage interest rates above where they might have been otherwise, something President Donald Trump has also been deeply committed to cutting. And rightly so. It makes sense. Besides home values being too high, very high interest rates can also discourage home purchases.
But that’s the trade off if you’re trying to help tame prices. When interest rates were falling in recent history, that’s when home values have surged. Therefore, one of the prospects of rates coming down now is that it could mean asset values like housing begin to surge again. Again, barring a homebuilding surge, that might be where we are right now. The Fed can help hold prices back, but it means higher rates, or it can help slash rates, but it might not be able to do both.
Robert Romano is the Executive Director of Americans for Limited Government Foundation.
