**Walker Webcast: Ivy Zelman Discusses Housing Affordability, Buydowns, and Market Outlook**
Housing expert Ivy Zelman recently joined Walker & Dunlop Chairman and CEO Willy Walker for an hour-long Walker Webcast, marking five years since her first appearance. In contrast to their earlier conversations centered around COVID-19, low interest rates, and the work-from-home wave, this discussion on August 20, 2025, focused on the realities of today’s housing market — including affordability challenges, interest rate expectations, and sales trends.
### High Earnings, But Misleading Signals
One key topic was the strong second-quarter earnings from publicly traded housing companies. According to Zelman, much of that performance stemmed from market optimism surrounding anticipated Federal Reserve interest rate cuts. However, she cautioned against placing too much faith in Fed actions.
“I’m less focused on what the Fed is doing and more focused on what will really improve affordability,” Zelman said. “Affordability is the worst it’s been since the early 1980s, when mortgage rates were in double digits.”
Zelman emphasized that while the Fed can influence short-term rates, it has little control over long-term interest rates—those more closely tied to mortgages. “We’re less optimistic that cuts will make a significant difference at the long end of the curve, especially given the current deficit and inflationary risks tied to tariffs,” she said.
### Rate Buydowns Fail to Boost Sales
Despite builders offering promotional rate buydowns—such as the widely advertised 3.99%—home sales have seen a sharp decline compared to 2023 and 2024. Zelman explained that buydowns initially stimulated some activity in 2022 as rates surged, which helped momentum through 2023. However, the environment in 2024 was more difficult for buyers.
“The second half of 2024 brought diminished credit quality and inflation, which ate into discretionary income,” she noted. “This impacted people’s ability to save, especially first-time buyers.”
Additionally, credit scores have dipped, and delinquencies on auto loans and credit cards are rising. Zelman also pointed out that the 3.99% rate is not always what it seems—builders often subsidize the interest rate by 100 to 150 basis points below prevailing rates, which may bring rates to around 4.99% or 5.0% instead.
### Affordability Crisis Deepens
Zelman underscored the growing financial burden for Americans trying to purchase homes. The market is increasingly divided between those who already own homes—the “haves”—and those attempting to purchase their first home—the “have-nots.”
“A single-income household today would need to spend approximately 60% of their paycheck to finance a median-priced home,” she said, factoring in mortgage payments, property taxes, insurance, and interest.
Contributing to the challenge is the increasing difficulty of saving for down payments, as inflation squeezes household budgets. Meanwhile, homebuilders are limited in how much they can discount due to rising costs, particularly land, which can make up one-third of total development expenses. Zelman noted that the land acquired during the early COVID era is expected to be absorbed by 2026, placing further pressure on margins.
Even if the Federal Reserve cuts rates, affordability improvements are unlikely. “Rates could stay stubbornly high for longer, regardless of what the Fed does,” Zelman said.
### The Broader Housing Shortage
Beyond mortgage rates and market confidence, Zelman stressed the need to address the root causes of America’s housing shortage—specifically, high land costs and burdensome regulations.
“We can talk about shortages until we’re blue in the face,” she said. “But the real barriers to providing affordable housing start with land costs and regulations.”
To help ease those constraints, Zelman suggested reducing impact fees and boosting federal involvement. She proposed a model where federal funding is tied to states’ efforts to increase affordable housing. “There are some big incentives that can work, but it’s got to come from the federal level,” she added.
### Looking Toward 2030
During the webcast, Zelman and Walker also looked ahead to the next five years. One looming challenge is the increase in home inventory expected as more Baby Boomers age out of their homes by 2030. This raises the question: who will buy those homes?
Zelman believes this is another affordability issue in the making. Many sellers will expect prices that new buyers—already priced out of today’s market—simply cannot pay. That mismatch could further compound inventory issues and keep newer generations from entering homeownership.
“That’s another headwind we need to start looking at,” she said. “We’re not that far away from 2030.”
