Today’s aspiring homebuyers contend with a US housing market of fewer available units selling for higher prices. It can be an especially frustrating combination if you earn a modest income and want to finance a lower-priced home purchase with a manageable mortgage. Homeowners accounted for just 36 percent of households earning less than $50,000 a year in a recent Federal Reserve survey. Among those earning $100,000 or more, 87 percent owned their homes.
Homeownership can bring notable wealth benefits. In 2022, homeowners’ median net worth exceeded renters’ by $385,800. Many of the wealth-building benefits come over cumulative years of ownership. But challenges often arise for lower-income families trying to hold onto their homes over the long term.
Why is it difficult to afford homeownership right now? Here are some of the factors at play and a look at how some communities and organizations help extend affordable homeownership to more families.
Home prices rapidly rose and there aren’t enough homes to meet demand
At the end of 2024, houses in the United States sold for a median price of $419,200—over $100,000 more than the median price in mid-2020. Just over one million homes were available to buy in March 2024, hovering near a 20-year low inventory level. Low inventory drives up prices, according to housing experts who point to several factors behind this dynamic.
Current homeowners are reluctant to sell. Some worry they won’t find another home to replace their current one with so few homes on the market. Others benefit from very low mortgage rates locked in a few years ago. The average 30-year fixed mortgage rate jumped from 2.73 percent on January 28, 2021 to 6.95 percent by January 30, 2025, driving up monthly homeownership costs for those buying now.
Two other factors affect availability. Older adults are aging in place longer, reducing the number of homes on the market. And investors, who typically buy properties for cash, can more easily purchase for-sale homes than those who need a mortgage or other financing.
Local zoning rules can also limit the inventory of less expensive homeownership unit options like condominiums, multifamily homes, and manufactured homes.
Financing a lower-cost home purchase can be difficult in some places
Some parts of the country have limited or no access to traditional bank branches. Particularly in rural areas, distance from a traditional lender can make it harder to get a mortgage with reasonable terms. Traditional lenders also tend to lack familiarity with the unique terms and processes that apply to the use of land in Indian country.
Even where banks are more accessible, homebuyers may struggle to find a lender willing to make a small mortgage loan. Typically, these are loans under $150,000 to finance lower-priced homes. Small mortgage loans tend to be less profitable for lenders and applications for such loans are more likely to be denied, according to a recent report. The same report found that in 2020, small mortgage loans under $70,000 made up less than 3.5 percent of all home purchase originations.
Yet small mortgage loans account for 40 percent of mortgages in rural counties and, without them, lower-income homebuyers may not be able to finance the homes they seek. One analysis found that just over a quarter of homes priced below $150,000 had mortgage financing. In markets where investors and better-resourced buyers are able to pay cash for less expensive homes, those who need mortgage financing may be shut out.
Built to fail? Contracts for deeds often sell a homeownership illusion
Contract for deed homeownership agreements can appeal to lower-priced home buyers who believe they are unable to qualify for or secure a mortgage. But CFDs often lack consumer protections and can cost unsuspecting buyers their home and their investment in it.
Nontraditional alternatives to mortgages can also carry risks
Traditional mortgages often feature consumer protections including home appraisal, disclosure of interest rates and terms, and a process in the event of foreclosure. But lower-income homebuyers unable to qualify for or secure a traditional mortgage may be attracted to potentially riskier financing alternatives. In some cases, particular homes may only be offered using one of these alternative purchase options.
For example, a seller and buyer may enter a contract for deed agreement. These contracts require buyers to make regular payments to a seller for months or years, similar to a mortgage. Unlike mortgages, though, contracts for deeds often lack borrower protections.
Under contract for deed agreements, buyers may face suddenly higher balloon payments and can be evicted if they miss even one payment. Buyers may be forced to walk away from a home on which they’ve made physical improvements and years of payments.
A 2020 Federal Reserve study found that 63 percent of identified contract for deed properties were concentrated in areas with lower median household incomes. Other research found that contract for deed properties increased in communities where residents were reeling from foreclosures and damaged credit after the 2008 Great Recession.
Home-only loans, sometimes used to finance homes sited on land owned by someone else, often carry higher than average interest rates that can end up costing borrowers more over time than traditional mortgages. Research showed 26 percent higher monthly payments for home-only loan financed manufactured homes compared with mortgage financed site-built homes.
Why are Native homebuyers ending up with more expensive loans?
Financing manufactured homes can cost Native borrowers on reservations twice as much as off-reservation white borrowers. A risky type of loan fuels the cost gap.
Some people more vulnerable to home loss, deteriorating conditions
It’s not uncommon for people to become homeowners by inheriting a relative’s house. But in some cases, inheriting a family home introduces complications, especially if the original owner died without a will. That can result in a situation known as heirs’ property, with multiple heirs inheriting interest shares in the same house.
Heirs’ properties may not have clear title, meaning there’s an unresolved issue around who owns the home. Problems with clear title also may stem from foreclosure proceedings or liens placed on the property due to outstanding debts, among other things. Without clear title, residents can’t sell the home or qualify for programs that help lower-income homeowners cover property repairs.
Even if they hold clear title, the lowest-income homeowners face higher home repair cost burdens. These homeowners spent 20 percent of their household income on home maintenance according to a recent report, compared with just over six percent for the highest income households. Aging homes needing upgrades residents can’t afford can lose value or become uninhabitable over time.
Losing the family home, with ripples down the bloodline
Heirs’ property situations can strain family relationships and put billions of dollars of wealth at stake. Read one woman’s story and learn how she’s now working to help others preserve their family ties, homes, and financial stability.
Adding more—and a greater variety of—housing units available for purchase
Given these homeownership challenges, many communities and organizations are exploring ways to help more people affordably buy and maintain homes. With such low for-sale housing inventory, one obvious response is adding more homes to the market. Single-family homes have become more expensive to build in recent years, though, and may not fit every potential homebuyer’s needs. Expanding local housing markets to include single-family alternatives may help address the inventory gap.
One such alternative, manufactured homes, make up about 10 percent of newly produced US homes each year. Manufactured homes now come in a wide range of options, including structures designed to blend in with site-built single-family homes. These modern manufactured units may now be allowed in some neighborhoods that previously zoned out manufactured homes.
Excluding any land costs, manufactured homes come in at about half the cost per square foot of new site-built homes. In 2021, a study found that more than 70 percent of manufactured home buyers earned less than $75,000 annually. That same year, about two-thirds of new manufactured homes could be purchased for less than $125,000. No site-built, new single-family homes were available for that cost.
Manufacturing affordable homeownership, one unit at a time
Manufactured housing offers a uniquely affordable homeownership on-ramp at a time when aspiring buyers can’t afford pricier site-built homes. Even with perception and financing challenges to surmount, some are finding creative ways to extend this homeownership option to more buyers.
The diverse array of ownership types documented in a recent Federal Reserve study offer other alternatives to a single-family home. These include 5.4 million condominiums, 614,000 cooperatives, and 1.6 million accessory dwelling units (ADUs) across the US.
Some of these alternatives offer low- and moderate-income households on-ramps into more affordable homeownership, especially in higher-cost housing markets. The relatively small footprint of some alternative homeownership models creates potential to increase both ownership and rental housing opportunity at the same time. Building a duplex or multifamily structure or adding a backyard ADU, for example, can provide more housing units on the same size lot as a single-family home.
Expanding access to lenders and financing options for lower-cost homes
Increased access to affordable mortgage products also helps expand homeownership to more households. Community development financial institutions (CDFIs) play a vital role in this effort.
CDFIs are mission-driven lenders dedicated to providing financial services where mainstream lenders may not. They fill in lending gaps in rural places, on reservations, and in other areas lacking nearby traditional bank branches. CDFIs work closely with the communities where they are located to understand and respond to the needs and interests of local borrowers.
For example, Native CDFIs, located on reservations and staffed by tribal members, are expert lenders on trust land. Research found that Native CDFIs’ efforts helped to positively impact credit scores and reduce loan failure in Indian Country.
CDFIs work with their clients over the long term to support homeownership success. For example, CDFIs can often help aspiring homeowners needing to improve their credit or consolidate existing debt before they are able to take on a mortgage payment. Some offer homeownership counseling and other one-on-one services to ensure first-time buyers are aware of and ready for homeownership responsibilities before they buy.
Investing from within: Native CDFIs help their people find home
Native CDFIs use creative approaches to help their neighbors navigate homeownership in Indian Country, making notable progress even at their smaller scale. But they can’t do it alone. Learn how other lenders can join NCDFIs to connect Native homebuyers with the loans they seek.
Informing aspiring buyers and homeowners with community resources
Having built trust and visibility with their communities and clients, CDFIs and community-based housing organizations are important resources for those navigating their local housing market.
Native CDFIs connect their customers with stable mortgage products offered specifically to those living on reservations and tailored to land use there. Because land cannot always be used as loan collateral on reservations, Native CDFIs help clients identify other qualifying collateral sources for a mortgage loan.
Community organizations also serve as information and resource hubs about potentially risky homeownership arrangements. Known and trusted local organizations often can connect affected homebuyers with legal and other service providers for help.
In some states, for example, legislatures have enacted laws to help reduce the harm to buyers of poorly executed contract for deed agreements. Several state laws also offer increasing protections for families fearing home loss due to heirs’ property complications. Some legal aid and pro bono lawyers specialize in these cases.
Exploring safe, stable, and affordable homeownership for more people
Homeownership remains a key goal for many low- and moderate-income people in the US. Yet these aspiring homebuyers face obstacles including high prices, low inventory, mortgage access challenges, and risky financing alternatives.
Acknowledging these hurdles, some communities are expanding their local housing markets to include more affordable single-family home alternatives. Others are sharing information to best prepare potential buyers for long-term homeownership. CDFIs and other lenders offer buyers options for more secure and affordable financing. Despite a challenging US housing market, these and other approaches may help more people achieve safe, stable, and affordable homeownership.
