The U.S. housing market: Navigating rising costs

How homeowners, first-time buyers, and renters are navigating the housing crunch

Current homeowners can take comfort in knowing their investment is sound. If they decide to sell and the home is priced fairly, they may field offers at or over the asking price. But it's a double-edged sword. High interest rates and low inventory can make finding their next home difficult. Of our surveyed homeowners with a mortgage, 78% have seen an increase in their housing costs, with 51% citing property taxes as the main culprit. Other cost factors cited include insurance premiums (27%) and a home equity line or second mortgage (14%).

76% of the homeowners we surveyed in the 25-34 age range are first-time buyers. This group faces a different challenge — buying a home in parts of the country that may be considered a seller's market. The competition can be overwhelming, with multiple bidders offering figures well over asking prices, even aggressively waiving inspections and financing. That may leave would-be buyers feeling anxious and hesitant.

Renters are also feeling the housing crunch. With homeownership out of reach for many, the demand for rentals increases, driving up rents and limiting availability. That forces many renters to settle for smaller spaces in less desirable areas. The main reasons renters are holding off buying are high home prices (34%), increased interest rates (23%), and economic uncertainty (20%).

"We believe homeownership should be an achievable goal for more Americans. By providing access, education, and financial support, we aim to help individuals and families build lasting financial security."

—Tricia Griffith, Chief Executive Officer, Progressive

The shrinking inventory dilemma: Where have all the houses gone?

The U.S. housing market inventory shortage can disrupt would-be homeowners and renters in some locations. Various factors can contribute to this imbalance of supply versus demand.

The lock-in effect

The lock-in effect happens when homeowners with low interest rates are reluctant to sell. As Duffy points out, "If I sell, where will I go? Even if I downsize now, I'm giving up my 3% rate for a 6.74%* rate."

*As of July 2025, the rate of a 30-year fixed mortgage according to Freddie Mac.

Rachel E., a first-time homebuyer from Massachusetts, says, "I got a rate somewhere around 6%, so compared to going rates, I feel lucky."

Economic uncertainty

78% of our surveyed homeowners have experienced an increase in their housing costs. They're hesitant to sell, preferring to wait out the housing crunch when things stabilize. Even if homeowners want to sell, they may encounter limited options, soaring prices, and bidding wars when buying their next home.

Rachel says she and her husband felt rushed to buy and don't love their house, but because of the economy, they're staying put. "We just had our second child and don't want any more change, so this is where we're living."

Limited new construction

The high cost of building materials and land makes it difficult for builders to profit from new housing. Many regions also have strict zoning regulations that limit the number of homes developers can build. Y.C., a renter in Las Vegas, has experienced this firsthand. "There's new construction here to help with the shortage of inventory," he says. "But much of the land in and around Vegas is owned by the federal government, which has limited expansion of new housing."

ADUs: A solution to the inventory crisis?

An accessory dwelling unit (ADU) is a smaller, secondary housing unit built on the lot of an existing single-family home. Many U.S. municipalities now allow ADUs, but each has specific regulations and requirements. These units can potentially impact the housing shortage by providing additional sources of affordable housing.

Antonellis sees ADUs as "a great opportunity for affordable housing that brings families together."

How the housing crunch has impacted renters

The recent housing market has significantly impacted many renters because they can't afford to purchase a home or buy one in the area they want to live.

Increasing rents

Because of the high demand for rentals, many landlords are raising rents, making it hard for renters to find affordable housing. 70% of survey respondents say they've experienced a rent increase over the last three years. But not everyone is feeling the squeeze.

Emily M., a 28-year-old renter since 2018, lucked out finding her dream apartment. "I secured a rent-stabilized place in the Brooklyn neighborhood I want, so I have no plans to move."

Lack of inventory

Even with new rental units being built, developers can't keep up with the growing population looking for housing. The limited supply leads to fierce competition among potential lessors, driving up rent costs.

High living expenses

Price increases on necessities such as food, healthcare, and transportation have made it difficult for renters to save for a down payment on a home. Y.C., a Las Vegan in his mid-40s, says he'd love to buy a home, "But prices here are unattainable, so I can't see myself buying anytime soon."

52% of our respondents who currently rent have considered purchasing a home, but high home costs, rising interest rates, and economic uncertainty prevent them from doing so.

Y.C. cites saving for a down payment as the biggest obstacle to buying a home. "With Las Vegas housing prices rising faster than average incomes here, and rents sky-high, it's nearly impossible for me to save for a down payment on a house."

What the experts say about housing market trends

Where you live impacts housing prices. Antonellis says, “Prices are dropping in the Southeast, but we're still seeing price wars in the Northeast." When asked about interest rates, she says, "They're going to reflect what the stock and bond markets do. If there's more turbulence in the economy, rates won't go down but will likely hover in the same range."

Regarding property taxes, Duffy points out that some states are exploring switching to a flat fee over a percentage. "If states like California with specific propositions that cap property tax increases don't voluntarily adopt a flat fee system, it could be decided for them, so they may want to get ahead of it," he says.

Duffy doesn't see a major housing market shift across the board, but it will vary by region. "Southern states like Florida and Texas shifted to a buyer's market with big increases," he says. "This could be a sign that people are tired of waiting. You may have a 2% mortgage, but if you don't like where you live, you can rent it as an investment property and move to a more desirable area."

Before you buy: What to consider when house hunting

Purchasing a home is likely the biggest financial investment you'll make, so it's wise to plan accordingly — from location to budget to long-term needs.

Prioritize your location

Before downsizing to a condo in Vermont, Donna R., a longtime homeowner in her 60s, knew that was where she would retire. "I knew there were more affordable places, but one thing I wouldn't compromise on was location." Our survey indicates that most respondents (80%) also choose to stay where they are instead of moving to a more affordable area.

Don't overextend yourself

Consider your budget when buying a home. "Never buy what you can't afford," Antonellis says. "Speak with a mortgage expert a year in advance to set up your finances. They can guide you on cleaning up debt, paying off loans, and getting a credit report."

Consider your lifestyle

Are you able or willing to make lifestyle changes, such as dining out, travel, streaming services, and entertainment? 30% of our surveyed homeowners say they eat out less, 26% have cut discretionary spending, and 33% have delayed making major purchases.