This week, the headlines are full of big, bold numbers. The S&P CoreLogic Housing Price Index shows home prices continuing to climb. Real gross domestic product (GDP) increased at an annual rate of 2.45% in the fourth quarter of 2024. The Personal Consumption Expenditures (PCI) index showed a 0.4% increase in February, putting the 12-month inflation rate at 2.8%, higher than expected. The Federal Reserve’s favorite inflation metric. These are the benchmarks we use to judge the health of our economy.
But for the millions of people trying to buy a home, secure a decent paycheck, or build financial stability, these numbers don’t match reality.
That disconnect isn’t accidental. It’s the result of outdated economic systems that still shape our financial lives today.
Case in point: the credit scoring model used by Fannie Mae and Freddie Mac – the two giants
that back 70% of U.S. mortgages – is based on the FICO formula from 1989. That’s the same year the Berlin Wall fell, Nintendo released the Game Boy, and The Little Mermaid opened in theaters. Since then, we’ve witnessed the explosion of the gig economy, the rise of online banking, and a dramatic shift in how Americans earn, spend, and save. Yet the model that determines who gets approved for a mortgage?
Still stuck in the past.
In 1989 the average borrower was on a traditional payroll, paid bills by check, and built credit through mainstream lenders. That model doesn’t reflect the millions of Americans today who work multiple jobs, freelance, drive for rideshare apps, or manage entire household budgets without credit cards. People now earn income outside traditional payroll systems. Many people pay for essentials with debit cards or cash, not credit cards. And yet, these individuals often pay rent on time, cover all their bills, and support entire families — but because they don’t fit the mold from 1989, the system treats them as credit risks. Not because they’re risky, but because the model was never built for them.
It’s not just credit scores that are stuck in the past. So is how we value labor.
In 1989, the median household income was $28,910,000.
Today it’s about $80,000. Meanwhile, the cost of living has more than doubled, and the GDP per capita has tripled. Yet our compensation systems still fail to reflect the contributions of working women, caregivers, and nontraditional workers who are the backbone of the modern economy. Nowhere is this more apparent than in childcare. Parents are being forced into impossible choices as costs soar. Between 1990 and April 2024, the price of day care and preschool rose 263%, nearly double the pace of overall inflation. For many families, having both parents stay in the workforce no longer makes financial sense. And when this is the case, women are the likely parent to exit the workforce. If women participated in the workforce at the same rate as men, the U.S. could see a $4.3 trillion boost to the economy by 2025. When caregivers are pushed out of the labor market, it doesn’t just hurt families, it weakens the economy.
And while inflation metrics might suggest improvement, the things that matter most, like housing, childcare, and healthcare, are still outpacing paychecks. Home prices are climbing, and mortgage rates remain elevated. For many, homeownership is further out of reach now than during the Great Recession.
The result? A 2025 economy that measures and manages by 1989 rules. That’s not just outdated, it’s unsustainable.
It doesn’t have to be this way. We have the data, the tools, and the technology to build a system that reflects how people live and work today. That means modernizing credit scoring models to capture real-world behavior, rethinking how we value income, labor, and care, and measuring economic growth in ways that reflect the real costs and realities families face.
Because until we do, the numbers may look good on paper—but the party won’t be real for the people who are still waiting to be let in.
Marisa Calderon is the resident & CEO of Prosperity Now.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this piece: [email protected].
