The Disappearing American Mortgage
If you’ve secured a loan and you are closing on a new home in the near future, congratulations. You’ve taken part in an essential middle-class rite of passage—and you’re one of the lucky few.
The mortgage, the cornerstone of wealth building for generations of Americans, is vanishing. Data from the Mortgage Bankers Association show that Americans are applying for fewer mortgages than they have at any point in the past quarter century, including during the worst of the Great Recession, when the jobless rate was more than twice as high. Since the end of 1999, 96 of the 100 lowest readings of the MBA’s weekly index of new mortgage-loan applications have occurred in the past three years.
The American real-estate market is frozen. Mortgage rates have just fallen below 6 percent for the first time since 2022. Still, few families are putting their homes up for sale, few families are buying, and little new stock is being created. High prices and high interest costs are holding working-class households out of the market, and wealthy individuals are making up a larger share of transactions. Young people are facing a future as perpetual renters. With less time to accrue home equity, many will end up poorer in retirement than their parents were.
This overlooked trend has a few obvious causes. After the Great Recession, the Dodd-Frank Act tightened lending and underwriting standards. Mortgage lenders increased the amount of credit extended to wealthy households and reduced the amount of credit extended to middle-income households. (They did not change the amount of credit offered to low-income Americans, who are unlikely to buy a home anyway.) Banks focused more on providing suites of services to the well off, such as home loans, credit cards, and brokerage accounts, and less on making bread-and-butter loans to working families. The changes made the financial system safer, but also made buying a home harder for many people.
At the same time, the country’s home builders sharply cut back on construction, producing a quarter as many properties in the early 2010s as they had before the Great Recession. Despite a recent uptick, they’re still producing roughly 40 percent fewer today, causing the country’s housing shortage to spread from the major coastal cities to smaller cities, suburbs, and rural areas. With supply constrained, prices shot up in the 2010s. The situation created winners. “Folks that bought, particularly pre-pandemic, have benefited from one of the biggest increases in home values that we’ve seen in history,” Michael Fratantoni, the chief economist at the Mortgage Bankers Association, told me. It also created losers. Many younger families couldn’t save for a down payment, given rising prices, the burden of student-loan payments, and the increasing cost of child care and health insurance.
[Read: It will never be a good time to buy a house]
When the coronavirus pandemic hit, the Federal Reserve dropped interest rates to zero. More than 6.9 million properties traded hands in 2021, pushing real-estate values up again. Even more borrowers—14 million of them—refinanced their existing loans to secure lower rates in 2020 and 2021. Then rising inflation forced the Fed to jack up borrowing costs. The average rate on a 30-year mortgage climbed from less than 3 percent to as high as 7.5 percent. Homeowners with cheap rates got “locked in,” leading the number of active listings to fall. The deep freeze commenced.
In 2024, families needed an income of $126,700 to qualify for a median-price home, up from $79,600 in 2021, Chris Herbert, the managing director of Harvard’s Joint Center for Housing Studies, told me. “That priced 8 million renters out of the market,” he said, noting that most renters make $50,000 to $60,000 a year.
Wealthy individuals and institutions became a stronger force. The portion of all-cash purchases rose 33 percent from 2020 to 2023. Cash buyers scooped up more than half of homes in New York City in the first six months of 2025. In West Palm Beach, Cleveland, and Miami, they made up more than a third of purchases. “Mortgage deserts” formed in disinvested neighborhoods, as well as in vacation towns and expensive cities, as real-estate-investment trusts and landlords scooped up “buy low, rent high” properties. In Baltimore, half of homes were purchased without a mortgage in 2022 and 2023, a report by Sharon Cornelissen, the director of housing at the Consumer Federation of America, found. In rural Hudspeth County, Texas, 98 percent were.
The country still has twice as many homeowners as it has renters, and the homeownership rate is down only four percentage points from its George W. Bush-era high. Nevertheless, the share of Americans owning a home has not climbed in five years, despite the low unemployment rate, increase in wages, and boom in asset values—an unprecedented trend. Many younger families just can’t get on the property ladder. In the 1980s, the typical first-time homebuyer was in their late 20s; now they are nearly 40, according to some surveys. In the country’s 50 largest metro regions, only 3.1 percent of people under the age of 30 have a mortgage.
The disappearance of the middle-class mortgage does not represent merely a short-term challenge for individual families. It portends major changes in the long-term financial security of the American middle class. The younger you are when you buy a property, the more time you have to develop equity and the more you benefit from rising real-estate prices. Imagine two people purchasing the same condo with the same loan terms, one at 28 and one at 48. If they both sell at 65, the latter’s settlement check will be only a third as big as the former’s, assuming that home values increase 3 percent a year. Plus, mortgage costs are generally fixed for 30 years, whereas rent goes up annually, sometimes far faster than wages. “Housing wealth provides a lot of stability,” Herbert told me.
Nobody likes paying their mortgage. But many Americans are going to wish they had the chance to.