• ⚠️ The U.S. is currently facing a shortage of 5.5 million homes, keeping housing prices high.
• 🏠 Only 15% of home sales are to investors as of late 2023—below historical norms.
• 📉 Entry-level home construction has plummeted 80% since the 1980s.
• 💸 Monthly mortgage payments are up 60% since 2020 due to higher interest rates.
• 🔒 Over 90% of U.S. homeowners hold positive equity, reducing foreclosure risks.

What’s Really Behind Today’s High Housing Prices?

It’s easy to blame investors or Wall Street when housing prices go up faster than paychecks, especially in places like Las Vegas where prices are very high. But the real estate market has many underlying problems. These include decades of not building enough homes, material and labor shortages, interest rate changes, and strict zoning rules. To understand why so many Americans now struggle to afford a home, we need to look closer at what's happening beneath the headlines.

Investor Myth: Are They Really Buying Up All the Homes?

The idea that investors are buying many homes, leaving regular buyers with fewer choices, has been a big news story. But the facts show something else. According to the National Association of Realtors (2023), investor purchases were highest in mid-2022. They made up about 20% of all U.S. home sales then. Since that time, this share has gone down to below 15%. This level is actually lower than what we have seen on average in some periods.

It helps to see the differences between investors. Only a small part of the real estate investor market consists of big companies like hedge funds. Most are "mom-and-pop" landlords. These are independent buyers who own only a few properties, often in their local area. Many of these people provide needed rental housing or help fix up old properties. This is especially true in places like Las Vegas, where tenant demand and population growth grow faster than homes are built.

Simply put, investors are part of the housing market. But they are not the main reason for high housing prices. The problem with affordable homes comes from not having enough homes, higher costs, and bigger economic changes. And these things affect everyone, whether they are an investor or not.

The Real Driver: A Historic Shortage of Homes

The main reason for today's problem with affordable homes is a surprising lack of them. The U.S. currently needs more than 5.5 million homes, according to Freddie Mac (2021). This lack of homes has been building for decades. It got worse because not enough homes were built for a long time, and then this problem grew after the 2008 housing crash. After that financial crisis, many construction companies closed down or built much slower. This was because they did not know what would happen and found it harder to get loans. As people started wanting homes again, not enough were built. And we have been trying to build enough homes ever since.

Las Vegas is a clear example. Before the crash, the city was a top example of housing growth. It was one of the fastest-growing city areas in the country. But after reaching its highest point in the mid-2000s, new building slowed a lot. As more people moved to the area, slow building caused a constant lack of available homes, especially cheaper ones.

The difference between how many homes there are and how many people want them has gotten much bigger over time. This makes real estate prices go up. And it makes it impossible for thousands of people to buy homes.

Post-Pandemic Construction Challenges

COVID-19 hurt almost every supply chain worldwide. And housing felt the effects right away. Factories shut down and shipping ports stalled in 2020 and 2021. This meant key building materials like wood, steel, and copper shot up in price. By mid-2021, wood prices alone had gone up by more than 300%, according to Fortune (2021). This made building more expensive and made it even harder to afford homes.

Besides this, there were not enough workers in construction. People stayed home because they worried about getting sick, or they simply quit their jobs. Also, getting permits and inspections took longer. Many local governments were getting used to working from home, and this made new building even slower.

These problems meant builders paid more money and projects took longer. Most builders passed these costs to buyers. This made home prices go up and reduced the number of affordable new homes for sale. Even now, years after lockdowns lifted, we still feel the effects. Building has not gotten back to full speed, especially in places with high demand like Las Vegas.

Low Mortgage Rates Created Housing Gridlock

During the worst part of the pandemic, mortgage rates went down to very low levels, often under 3%. This happened because the Federal Reserve used strong money policies to boost the economy. At first, this seemed good for buyers. Cheap loans caused record high demand. Many homeowners refinanced their loans. And new buyers rushed to get cheaper monthly payments.

But this short-term good thing caused a long-term problem: housing gridlock. Interest rates have climbed to about 7%. So, homeowners who got ultra-low rates are now not wanting to sell. Why trade a 2.5% mortgage for one more than double the rate? This hesitation, called “golden handcuffs,” is causing a sharp shortage of homes for sale.

According to the Mortgage Bankers Association (2023), many people who might sell are choosing to stay put. This is true even if their families have grown out of their current homes or they might otherwise think about moving. The result is a much smaller number of homes for sale. And this makes housing prices worse even though fewer people are looking to buy.

In Las Vegas, this has created a strange situation. There is less buying and selling overall. But prices stay strong because there aren't enough homes.

Wages vs. Home Prices: A Growing Gap

One of the most worrying reasons for today's affordability problem is the widening gap between wages and home prices. Since 2020, home prices across the country have shot up more than 40%. But the average household income has gone up only 12%, based on U.S. Census Bureau (2025) data. This difference has completely changed who can buy a home. It's not just about what places are affordable, but about who can even take part.

In Las Vegas, the problem is even clearer. Average home prices now sit around $450,000. So, the money needed for a regular mortgage is more than what many residents make. This is especially true for those who work in the city's main hospitality and service jobs. For many Southern Nevadans, the dream of owning a home is still frustratingly impossible.

This difference between income and home prices hurts first-time and minority buyers more. It makes wealth gaps between generations worse. And it keeps many people from building wealth, which owning a home usually helps with.

Mortgage Rates and Monthly Payments

For many buyers, the main problem is not the high upfront price. It's how much it costs each month to own a home. Interest rates greatly increase costs. Even when home prices stay the same, higher borrowing costs can make monthly mortgage payments shoot up.

At today’s average mortgage rates near 7%, the regular buyer pays about 60% more each month than in 2020 for the same home, as Redfin (2023) shows. That means fewer buyers can qualify or feel good about taking on new debt. This reduces how often people move homes and how often properties change hands.

This also has strong mental effects on buyers. They often feel priced out, even when property prices have not gone up a lot. The truth is that interest rates have changed a lot very quickly. And these rates affect what people can afford more than the asking prices do.

Why Builders Aren’t Solving the Housing Crunch

Demand remains strong, and prices keep climbing. So, why are homebuilders not rushing to put more new homes on the market? The answer lies in reasons like twisted incentives, high costs, and zoning rules. These make building affordable homes less appealing or even impossible for many developers.

According to the Urban Institute (2022), the number of new starter homes (under 1,400 sq. ft.) has fallen by over 80% since the 1980s. Instead, builders mostly focus on homes that bring in more profit. These are luxury homes or big suburban builds. This is because these offer better money back on what they spend.

There has also been a clear change toward homes built for renting. These communities are planned from the start as rental places, meaning whole neighborhoods are for renters, not owners. While having rentals meets a real need, it is not the same as homes people own. And it reduces the number of affordable homes available to buy.

High land prices, expensive permits, resistance from neighbors to building more homes in an area, and not enough money for smaller projects all affect what gets built. In Las Vegas, much open land is owned by the federal government or needs special environmental care. Dealing with these limits adds even more problems to building more homes.

Las Vegas Market: Special Pressures and Competition

Las Vegas faces a very unpredictable housing situation. Many retirees, remote workers, and people looking to save money moved there. During the pandemic, many people moved to Vegas from other states. Buyers from San Francisco, Los Angeles, and Seattle came with large budgets. They often offered more money than locals, which made prices go up fast.

The city’s reliance on tourism and entertainment jobs, which are often hourly or seasonal, makes it hard to keep homes affordable. Also, the lack of available land (70% of Nevada’s land belongs to the federal government) and growing worries about water shortages make it harder to build more. Local zoning rules and environmental checks slow down building more affordable homes closer to where people work.

In this quick-moving housing market, locals often have trouble competing. This is not just against investors. It is also against professionals moving in who have cash or high loan approvals.

There’s No Big Wave of Foreclosures Coming Soon

Are you hoping for a market crash or a big wave of foreclosures before buying? Experts say you might wait for years. Prices are cooling in some areas. But most homeowners are still in good financial shape.

More than 90% of homeowners have more value in their homes than they owe, according to CoreLogic (2023). This means they owe less than what their homes are worth. So, it's very unlikely they will fail to pay or be forced to sell in most cases.

Stricter lending rules after 2008 have stopped risky loans. And today’s borrowers usually have better credit scores and more stable finances. For these reasons, even if home prices see small price drops, Las Vegas (and the national market) is unlikely to see a housing collapse like in 2008.

The Way People Feel About Home Affordability

How affordable homes feel is not just about money. It is also about emotions. Many buyers today compare current conditions to unusually good times in the past. An example is the 2.75% interest rates in 2021. This unrealistic comparison point makes even steady home prices feel unfair.

Higher monthly costs, fewer homes for sale, and strong competition add to buyers feeling tired and upset. People may feel homes cost too much. This feeling likely comes more from loan conditions than from homes truly being worth too much. The truth is that today’s home prices show the real costs of labor, land, and materials. They do not come from speculative bubbles.

We need to change how we think about affordability. Instead of only looking at the purchase price, we should focus on the monthly costs of owning a home. This helps buyers make smart choices they can stick with.

Fixing Affordability: Real Solutions Ahead

To make homes affordable again, we need big changes in many areas:

• ✦ Changing Zoning Rules: Letting people build apartment buildings, small extra homes (ADUs), and more homes closer together in city centers would mean more homes.
• ✦ Working Together: Especially in cities like Las Vegas, giving builders a reason to build affordable homes, using public money or tax breaks, can help get more homes built.
• ✦ Faster Permits: Making approval processes simpler makes it less risky for builders. And this can lead to lower final home prices.
• ✦ Focused Building: Supporting starter homes and projects for different income levels, instead of only luxury or build-to-rent places, directly makes homes easier to get.

Local leaders in Nevada are already looking into these choices. Interest rates becoming steady over time and changes in federal money policy can also help calm the market.

How to Approach Las Vegas: Steve Hawks’ Market Insights

Las Vegas remains a lively market with many chances. And people who own homes for a long time still gain from rising value and tax benefits. Steve Hawks, an experienced expert in the field, says to focus not on timing, but on what you can truly afford. If the monthly payment works, market changes over time matter less.

Smart buying means looking closely at how your neighborhood might grow. This means checking school quality, how long it takes to get to work, and any new businesses planned. With fewer choices available, working with an experienced local agent helps you not only find a good home. It also helps you understand market information and when to buy.

It’s Not Just Investors — It’s a Problem with the Whole System

Blaming corporate landlords or flippers may feel good. But it takes away from the real problems. Rising home prices and falling home affordability are the results of decades of policy problems, issues after the pandemic, and changing economic times.

Understanding these underlying problems helps buyers and leaders think carefully about solutions. Whether you're buying your first home or looking after investments, knowing what truly drives the market is your best way to make good choices.

Want to see your choices in Las Vegas? Connect with Steve Hawks for expert, honest advice in today’s complicated market.

Citations

• CoreLogic. (2023). U.S. Homeowner Equity Report. 
• Fortune. (2021). Lumber prices surge and their impact on housing. 
• Freddie Mac. (2021). Housing Supply: A Growing Deficit. 
• Mortgage Bankers Association. (2023). Mortgage rate trends & homeowner behavior. 
• National Association of Realtors. (2023). Residential investor activity. 
• Redfin. (2023). Impact of 7%+ mortgage rates on buying power. 
• U.S. Census Bureau. (2025). Median income growth vs. home price appreciation. 
• Urban Institute. (2022). Decline of entry-level housing supply.