Housing Affordability - It's a Problem Today and for Years to Come

“Mr. Huss, I just don’t know that I’ll ever be able to buy a home.”    

I was a bit floored by the words and the tone in which it was said.  This was from one of my son’s friends who has a fabulous job as a nurse with a specialty in a major hospital here in Charlotte.   I don’t know anything about her earnings, savings, etc. but suspect she is good on all fronts.  This really is her fear that even though she saves and works hard that she just can’t keep up with housing appreciation. 

In today’s Wall Street Journal, there is an excellent commentary piece by Justin Lahart .  Housing Affordability Remains an Economic Burden    Lahart leads with the fact that housing has helped economic growth in the 3rd quarter.   He immediately follows this by saying this shouldn’t mask the fact that what is happening in the housing market is utterly and horribly bad and that the economy is worse off for it.”

What is going on?

  1.  We have all seen meteoric home value appreciation over the last few years. 
  2. We’ve seen rates climb to 8% (which happens to be really close to the historical average)

What are the consequences today?

  1.  Those who have a very favorable mortgage rate don’t want to sell and buy something that will greatly increase their monthly spending.  They are not putting inventory on the market.
  2. Purchase costs have increased as has the cost of money, which puts some people out of the market.
  3. Inventory levels are at all-time historical lows. 
  4. New home builders have not been able to add new homes at a pace to keep up with demand. 

What is the future for housing?

  1. Supply of new homes is so far behind that it will take years to catch up.
  2. Housing is not going to crash like 15 years ago.  The situation is about supply and demand which is not some derived financial situation that created an issue.

My thoughts on what must happen.

  1. Interest rates need to come down to create a more favorable opportunity for current homeowners to make a move.  Unlock the opportunities for them to do something different and create opportunities for others.
  2. I do think that demand will go up as well, but probably at a slower pace than inventory to market.  
  3. Land developers need to get more lots out there. This isn’t just on the development community.  This is also governments working with them on projects by addressing infrastructure – roads, utilities, water, schools, etc. 

This is not going to be easy.  This is going to be a decade long issue that probably isn’t going to be smooth, but at this point, any movement to create a better situation would be positive. 

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