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The Housing Market Paradox: Why Lenders Face an Impossible Choice

In today’s mortgage lending landscape, we face a critical paradox that needs addressing. As lenders, we’re mandated to serve our entire community – including underserved, minority, and low-income populations. However, the current housing market has created an impossible situation that deserves honest examination.

The Stark Reality of Housing Affordability

Let’s look at the sobering numbers: Home buyers now need an 86% income increase to afford rising home prices. The median home affordability requirements have literally gone off the charts. While the average American household income hovers around $85,000, the income required to purchase a median-priced home has skyrocketed to $158,100.

This creates a devastating math problem: if the average family can’t afford a home, those below the average are completely priced out of the market. What was once termed the “underserved” community has effectively become the “unserved” community – not by choice, but by economic reality.

The Lender’s Dilemma

This situation puts lenders in an impossible position:

If we don’t serve these communities, we risk violating the Fair Housing Act and ECOA, potentially losing our licenses
If we try to serve them, we’re setting up both ourselves and our clients for failure, as the numbers simply don’t work

The Supply Crisis

At the heart of this issue lies a massive supply problem. Federal Reserve researchers estimate that home construction would need to expand by nearly 300% to meet current demand. This isn’t just a number – it’s a clear indicator of policy failure.

To put this in perspective: we can send Tesla cars to Mars and build $9 billion telescopes a million miles from Earth, yet we can’t solve our housing supply crisis. The resources exist – just look at Canada’s abundant timber. What’s lacking is political will and proper policy direction.

The Real Solution and Its Complications

The obvious solution seems simple: build more homes to dilute the high-priced inventory. However, this presents its own challenges. A significant increase in housing supply would likely cause property values to decrease, potentially erasing what some consider “fake equity.” While media outlets might decry such a market correction, it could be the first step toward genuinely restoring the middle class’s ability to achieve home-ownership.

The Industry’s Role

Contrary to popular narratives that paint lenders and realtors as adversaries to affordable housing, we’re actually positioned to be part of the solution. However, current market conditions and regulations force us into an impossible choice:

Follow government mandates and risk business failure
Focus on affluent clients and risk fair lending violations

Moving Forward

The path forward requires honest dialogue about these contradictions in our housing policy. We need solutions that align market realities with fair lending goals – not policies that sound good on paper but prove impossible in practice.

Until policymakers address these fundamental issues, lenders will continue facing this impossible choice between serving all communities and maintaining viable businesses. The solution isn’t choosing between these options, but rather fixing the systemic issues that created this false dichotomy in the first place.

Real change will require bold policy moves, likely including: