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Morning market minute: FHA loan demand shows rising stress among homebuyers

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Over the past three years, demand for home loans from the Federal Housing Administration has roughly doubled–a reflection of tighter lending standards among banks amid rising mortgage rates, which currently sit above 7%, and intensifying affordability issues.

First-time buyers are turning to government-sponsored loans in a way not seen in years as in many cases they contend with deteriorating credit quality.

FHA loan volume

The National Association of Realtors’ Housing Affordability Index sits at 99.30 which is a 20-year low and reflects the financial stress many homebuyers face.

In addition to the financial stress among buyers, market conditions are posing a challenge. Not only is the supply of homes anemic, but mortgage rates are also elevated, as are home prices in most major metro areas.

While conventional home loans still make up approximately 60% of all loans, purchasing a home at this point is financially out of reach for a growing percentage of the population.

Read RSM’s global economic outlook for 2025 in the latest issue of The Real Economy.

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel and the UCLA Anderson School of Management's Board of Directors, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia. In December 2023, Brusuelas and the economics team were recognized on Bloomberg's list of Best Bond Forecasters after correctly predicting where the benchmark Treasury would end the year.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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