Navigating the U.S. Housing Crisis: Michael Eisenga Provides Expert Insight on the Market's Challenges

COLUMBUS, Wis., Feb. 5, 2025 /PRNewswire/ -- The U.S. housing market is facing an unprecedented crisis, with mortgage applications at historic lows, home affordability reaching record-breaking lows, and demand for homeownership dwindling. Michael Eisenga, President and CEO of First American Properties, offers expert analysis on these pressing challenges, shedding light on the factors that have led to the current housing market turmoil.

With over two decades of experience in real estate, mortgage banking, and commercial real estate, Eisenga provides a seasoned perspective on the housing crisis. "We're witnessing the biggest collapse of homebuyer demand in U.S. history," said Eisenga. Mortgage applications have fallen by a staggering 63% since their pandemic peak, far surpassing the 2008 financial crisis. Even when compared to pre-pandemic levels, the drop remains substantial, at 52%.

The crisis is largely driven by a combination of high home prices and rising mortgage rates. During the pandemic, historically low mortgage rates and escalating home prices fueled a surge in demand. Today, however, prospective homebuyers are faced with skyrocketing prices and mortgage rates, leaving homeownership out of reach for many. For example, a $400,000 home purchased in 2019 at a 3.5% interest rate would have a monthly payment of $1,796. Today, the same house would cost $500,000, with a 7.26% mortgage rate, driving the monthly payment to $3,416—an increase of $1,600 that many buyers cannot afford.

Eisenga further highlights that while mortgage rates of around 7% are not far above historical averages, they are compounded by home prices that are 80% above the long-term norm, creating the highest inflation-adjusted prices in 134 years. Even during the 2008 financial crisis, prices did not reach these levels.

The affordability gap continues to grow. According to Eisenga, prospective buyers now need an annual income of $114,900 to purchase a median-priced home, significantly higher than the median household income of $74,000. This gap has left many buyers unable to enter the market, exacerbating the crisis.

Adding to the challenges is what Eisenga calls the "golden handcuff" effect, which has homeowners hesitant to sell. Many who secured low-interest mortgages in previous years are reluctant to move, as buying a new home would mean taking on significantly higher mortgage rates. As a result, inventory levels remain low, further contributing to the supply-demand imbalance.

While inventory has surged to over 1.15 million homes nationwide, Eisenga cautions that this increase does not necessarily signal a healthy market. "Despite more homes being listed, 50% of U.S. states are experiencing price declines, and those declines are happening faster than they did before the 2008 housing bubble," said Eisenga. "Without substantial price reductions, the market remains largely inaccessible for most buyers."

The outlook for affordability remains grim, with Eisenga noting that any meaningful improvement will require both lower interest rates and reduced home prices. However, with rates not declining at the necessary pace and wages growing modestly, it could take years for income levels to catch up with current prices.

Looking forward, Eisenga predicts pressure on the luxury housing market, particularly in high-end coastal areas. Homes in these markets are staying on the market longer and undergoing multiple price reductions, signaling a cooling market. This mirrors trends seen before the 2008 financial crisis, where luxury properties were often the first to feel the effects of a downturn.

Another factor influencing the market is the aging baby boomer population. As this demographic downsizes and sells larger homes, fewer buyers will be available, potentially affecting prices further.

Eisenga also points to the possibility of an economic slowdown or recession, which could lead to even more significant price corrections. "If the economy weakens, many buyers may find themselves unable to maintain their homes or enter the market at all," he said.

Despite the current challenges, Eisenga remains optimistic about the long-term outlook. "Housing markets are cyclical, and while the short-term outlook is bleak, conditions will eventually improve," he said. Eisenga advises prospective buyers to remain informed, monitor interest rates, and be patient for potential price corrections. "These downturns usually play out over a 3-to-5-year period. So be patient, and you will be rewarded," he added.

Michael Eisenga's insights offer a comprehensive understanding of the complex factors at play in the current housing market. As a leader in real estate and a former mortgage banking executive, his analysis provides valuable guidance for buyers and sellers navigating today's volatile market.

Read this article on Michael's website here.

About Michael Eisenga
Michael Eisenga is the President and CEO of First American Properties, a leader in the real estate industry with more than two decades of experience in real estate, mortgage banking, and commercial real estate. Eisenga has been instrumental in navigating some of the most challenging periods in the housing market and continues to provide valuable insights into the evolving real estate landscape.

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