U.S. Housing Market on the Brink: ‘Vicious Cycle’ Looms, Warns Top Mortgage Executive—What It Means for America

“We’re on the edge of a vicious cycle where fewer and fewer Americans can afford the dream of homeownership, and that’s not good for the country,” said Laura Escobar, president of Lennar Mortgage, at the annual Mortgage Bankers Association (MBA) conference in Denver.

Photo: Justin Sullivan/Getty Images

Escobar, who has recently taken the role of MBA chair, addressed the 275,000 members, emphasizing her commitment to prioritize housing affordability with policymakers and government officials. She aims to push for relaxed regulations in mortgage lending and home construction.

Lennar Mortgage, a part of Lennar, the U.S.'s second-largest home builder, welcomed Escobar in 2002. Echoing the concerns raised by the housing industry, especially builders, she expressed frustration over the inventory shortage that continues to drive up housing prices.

The surge in housing costs has been dramatic, with prices at record highs and the average rate for a 30-year mortgage hovering near 7%.

According to Escobar, the U.S. faces a shortfall of 1.5 million homes, and the housing supply isn't growing fast enough to match household formation. “Decades of excessive regulation have made it increasingly challenging to build new homes or renovate old ones,” she noted, citing that it’s especially tough for smaller builders.

As a result, fewer new homes enter the market, pushing up prices for existing homes even faster.

She highlighted zoning restrictions that limit housing expansion, mentioning that approximately 75% of residential land in the U.S. is zoned solely for single-family homes. Regulations alone add about $94,000 to the price of a new home, based on a 2021 National Association of Home Builders study.

Additionally, labor and building material costs have spiked by 31% since the onset of COVID-19.

Escobar vowed to bring this urgent issue to lawmakers and regulators, with a focus on boosting housing inventory to curb rising prices. Her message to Washington policymakers, she said, would be clear: “Stop talking about affordability and start making it happen.”