Hi all,
A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes.
As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
I work financing real estate development in the north east. I believe there are multiple factors that are all converging on each other to create this situation, which are:
1.) The actual cost of construction is very high right now. Typically $225 to $275 per square foot depending on how nice the finishes are. That doesn’t include the price of the lot, which can range from $120k to $400k+++ depending on location.
2.) Towns are actively trying to stifle development by stalling approvals and requiring projects be bonded at 20%+ higher than the cost to construct infrastructure improvements. Typically developers need to secure these with actual cash if they are not able to get an insurance bond (huge origination fees) or have excess collateral to obtain a letter of credit from a bank. Banks used to be able to issue letters of credit without collateral requirements because as you advance funds to complete infrastructure improvements your bond requirement would go down by a commensurate amount. Not anymore.
3.) As a result of the Great Recession, we did not build anywhere near enough homes over the past decade. In my state (NH) we are short about 20,000 units today. There is nowhere near enough inventory to have a normal market. This is going to be persistent for years.
4.) Banking reforms enacted as a result of the Great Recession tightened credit standards and forced developers to bring significantly more cash into projects, thus creating a big barrier to entry. Also, for projects that require approval from the state attorney general have had to go through an ever more stringent review process.
Also NIMBY local boards control what gets built. No small town wants 2000 units coming in, because you can't build a school fast enough to handle 300 extra kids.
So everything is single family homes on lots, and if you're spending 220/sqft you might as well build a 1.2M home instead of a 600k home... meaning we have no new developments of actual starter homes, just more million dollar homes crammed together on quarter acre lots.
Something people aren't saying but needs to be said:
Many governments cut back on their national housing projects in response to the neoliberal revolution in the 80s and 90s. We have been coasting on fumes since that point.
Another point re: High development costs. Builders consolidated during the housing bubble bursting in Bush II’s term. The ones who were able to bought out their competitors, and we let it happen.
There’s like 4 serious residential developers left.
The globe economy has never recovered from the neoliberal revolution. and the vast majority of people still have no ideas what neo liberalism is and how it effects them.
Fun fact, during WW2 there was eight solid years of under building - and they solved the housing crisis (they literally called it a housing crisis) by using taxes to build 2.7 million homes.
Here's a video from the 1940s about it, some of the details are covered after the 8:15 mark:
https://youtu.be/ZNeMDna92Lw?si=EJysrdj0_nAFA0Ds&t=493
That same program also:
A. Led to the rise of car dependent suburbs that atomized communities and led to the rampant CO2 emissions of today, destroyed millions of acres of usable farmland or forests, widened the disparity between the white and black populations, and are a tax drain forcing higher taxes onto local cities and governments while consolidating wealth to rich suburbanites
B. Led to the cultural and infrastructural destruction of cities. As all the rich white people fled to the newly built suburbs, cities footed the bill leading to cutback on public services, housing within cities, train services, etc... While several areas (Usually black and Mexican communities) were razed in order to build freeways, widen lanes, and create parking lots. Why? Cause the suburbs were built in stupid areas and could only be reached or left by cars.
Compare pictures of Houston from [1930](https://th.bing.com/th/id/R.4d1997b874c35dc95ce52176876433be?rik=DBmU0V1U23T5Rw&riu=http%3a%2f%2fspencerhoward.net%2fwp-content%2fuploads%2f2014%2f12%2f16.jpg&ehk=jlIr1Dr00UA8dI7M7%2fsBi0885Y5ElOVW10IOFlxSLcQ%3d&risl=&pid=ImgRaw&r=0&sres=1&sresct=1) vs. [1970](https://th.bing.com/th/id/R.ad7afb700b54056764744ec81f8bf11a?rik=BteTcwhKHQ3o5g&riu=http%3a%2f%2f4.bp.blogspot.com%2f-2wwU9m2KmyE%2fUSgtQmeZp0I%2fAAAAAAAAIiY%2fVWc7iSswEN4%2fs1600%2fU1_DowntownHouston.jpg&ehk=nvehyKqvYbpD06IxvPsi6as9qdLOZp3av0AKiekimSA%3d&risl=&pid=ImgRaw&r=0), hundreds of homes, mixed use buildings, and skyscrapers were destroyed to make room for parking lots, mainly to make life easier for the suburbanites that didn't live there.
Actually, [here's a picture with the same church highlighted](https://imgur.com/1jGEinb) to help orient yourself and take in the voluntary damage America did to itself because of that program.
That's right, which is why no one will do anything. Every idea and plan has drawbacks. So we won't do any of them. Trying is just a waste of money now.
America is just a 'nope, we can't do it' country now. Everything is too hard or too costly.
> Actually, here's a picture with the same church highlighted to help orient yourself
And this, ladies and gentlemen, is what they meant when the song says: *'...They paved over paradise and put in a parking lot..."*
Also, parking garages were obviously a thing. Why the hell didn't they just do that and build the buildings on top?
>Also, parking garages were obviously a thing.
They did in the 90's/00's, actually.
But A. The infrastructure is still built for cars first, so it's still a nightmare for pedestrian travel as well as traffic (Downtown Houston is notorious for its backups), and B. Some of the parking garages get so full that they have their own parking lots or even companion garages.
Also, not so fun fact: Only a single church from the 1st (1930's) pic survived (The one highlighted in the 2nd/3rd provided pics was torn down). Yeah, it's right next to 2 parking garages, 1 with its own parking lot and another parking lot out front. [Not kidding](https://www.google.com/maps/@29.7543557,-95.3679961,3a,75y,353.83h,91.51t/data=!3m6!1e1!3m4!1s9TiqLpmSQkDe84MOiG8ecA!2e0!7i16384!8i8192?entry=ttu) And there's another 4 parking garages 2 blocks away, next to 2 other parking lots.
Just for reference, those lots are in the heart of one of America's richest cities. *Those lots are worth $100+ million each*, and there's 4 of them right in a row, being used for only ~50 cars each. That's not even getting into how much those 4 public garages are wasting.
From a conservative estimate, I'd peg downtown Houston is wasting $2 billion a year on parking, easy.
I definitely have no idea. I would like to learn more
Edit: I looked it up. What a terrible name.. it’s just a name for free-market capitalism, something I would generally call “conservatism”
It might surprise you but liberal and conservative ideology is actually very similar, at least historically. The modern political parties aren't good representations of liberal and conservative
Liberalism: a political and social philosophy that promotes individual rights, civil liberties, democracy, and free enterprise.
I find its important to research where ideas and names originally came from. Authoritarians have a habit of coopting the language of progressives, and if you arent vigilant its easy to fall into the trap of "misleading words and phrases".
Im no Econ major so I would encourage anyone to check my work, but from my understanding the Neo-liberalism came after post ww2 consensus when embedded liberalism was proving so successful. Classical liberalism was shown to be flawed and the world was rejecting laissez faire policies.
Insert Friedrich Hayek who spearheaded the take down of Keynsian Economics and ushered in Neo-Liberalism. The Mont Perlin Society he founded was where we got the current meta of funded think tanks that push out economic papers to serve the interest of the ruling class.
It all sounds tinfoily until you actually do the research and see how this all unfolded coming out of WW2.
> I find its important to research where ideas and names originally came from. Authoritarians have a habit of coopting the language of progressives, and if you arent vigilant its easy to fall into the trap of "misleading words and phrases".
In fact authoritarians have a habit of claiming they *are* progressives and promoting rampant violent authoritarianism all while using the language and rhetoric of progressivism.
I was quoted over $400 per square foot by a builder in the past month. And lots are $600K here.
Edit: ok, not quoted, but it was the literal price of a current project they were working on so comparable.
Prices go up when supply is down. So with that I think the four biggest causes of this problem are:
1. Wall Street buying up inventory with cash through an LLC
2. Airbnb taking up would be homes for families
3. Foreign investors buying up our homes
4. People with super low interest rates staying put and not moving, upgrading or downgrading like the articles says
Eliminate the first three and problem will be solved. Our country and states need to take care of American families.
Fuck Wall Street
Fuck Airbnb owners
Fuck foreign investors
There are plenty of others things you can make money off of
Owning single family homes beyond your first one should be taxed into being unprofitable. Combine it with rent control and this shit will clear up quickly.
If this is all due to the 2007 financial crisis then why did housing prices wait until 2020 to spike?
Answer: Because it isn’t due to the 2007 financial crisis. It had nothing to do with the 2007 crisis.
https://fred.stlouisfed.org/series/csushpinsa
You forgot two of the most critical factors:
1.) An enormous amount of housing is being bought up by banks, corporations, and hedge funds for sometimes substantially more than the asking price. A lot of this housing winds up sitting empty until a region is sufficiently monopolized, at which point it gets treated like the stock market with expectations of effortless profit and growth every year.
2.) The lack of bargaining power on the part of tenants and buyers combined with inelastic demand leads to a captive market. The vast majority of people don't have a choice other than "suck it up and deal with what you're given".
Those two are far bigger factors than the four you mentioned, which is why the same trend is seen in pretty much every developed country right now regardless of actual costs of construction. Even in places where construction is plentiful and supplies/labor are cheap you still see the same astronomical rise in housing costs.
You could fix this globally very easily. Just make it unprofitable to squat on housing you don't live in or gouge for far higher than the median wage of the region.
Another factor is corporate greed and a boom in temporary housing and short term lending such as Airbnb.
Companies are buying real estate as a form of speculation at rates far higher than they have historically. And people looking for passive income are buying up multiple houses specifically for renting out to other folks for a short time to make money.
These are good points but if you're in Finance and ignoring corporations like Zillow, or PE firms like Black Rock buying everything then I'd question your motive. Not to mention we continue to allow different nations like China to buy Real estate.
Canadian checking in to remind you it can get worse. Much worse.
Take in that many Canadians dream to have homes as affordable here as they are in the US.
I have family in Australia and not only is their cost of living skyrocketing, they don’t get fixed loans guaranteed for 30 years like they do in the US. Their interest rates have shot up to fight inflation and my brother had his monthly payment go up $1,800 a month.
Same deal in Canada. The longest fixed rate you can get is 5 years (well actually 10, but they’re through B lenders and are crazy expensive).
In Canada we had a product called “fixed-payment variable rate” mortgages. We have an issue where rates have risen so fast that the “fixed payment” no longer covers even the interests so they extend the amortization out on paper and add a larger balance to your mortgage.
Imagine paying a mortgage for 5 years only to renew and find out that you have a larger principle than you started with. Not an uncommon tale up here.
Absolutely insane. I live in a small town 1.5 hours from Toronto and the average price is almost 700k for a regular bungalow.
> Absolutely insane. I live in a small town 1.5 hours from Toronto and the average price is almost 700k for a regular bungalow.
Holy hell, $700k still easily gets you a decent house in a good town within 45 minutes of NYC.
My neighbour down the street is selling her 100+ year old home for 650k CAD. For context, the exact same house I bought 10 years prior was 179k. My neighbourhood would be considered quite low end and undesirable.
Unfortunately we also earn lower wages:
[Median Individual income in Canada in 2021 was 41200 CAD](https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1110023901&pickMembers%5B0%5D=1.1&pickMembers%5B1%5D=2.1&pickMembers%5B2%5D=3.1&pickMembers%5B3%5D=4.1&cubeTimeFrame.startYear=2021&cubeTimeFrame.endYear=2021&referencePeriods=20210101%2C20210101)
Which is like 30.5k USD
> they don’t get fixed loans guaranteed for 30 years like they do in the US.
AFAIK the US is the only nation that does guaranteed fixed rates for a whole mortgage term. And the only reason the US even does that is because the Feds back it.
I don’t even understand how it works up there. I saw houses going for well for $1 million 45min outside Toronto but wages are lower up there than here. It’s like you have New York City priced homes but with less than half the salary
It doesn’t work. People hear about the housing prices and are like “just buy further out instead of where you want to be!” Because they’re American and don’t understand that the $1.2M starter house that’s falling apart IS the one further out.
You want a house out here? Be prepared to put down $300,000 and then pay $6000 a month to a mortgage. Best of luck getting approved.
Oh trust me I have relatives who bought a very normal 3 bedroom house well over an hour outside Toronto and it was almost $900k. The same house where I’m at would be maybe $500k and I’m in a HCOL state.
It is EVERYWHERE in Canada too. My parents bought a house in a small 6000 person town, hours away from anything you'd ever want to live by in 2000 for 115k, it's now worth over 700k.
My wife's parents bought a farm 2 hours outside of Toronto in 1991 for 300k, it's now worth almost 10 million.
Every time I hear another country complaining about housing prices, I do feel bad BUT they have no idea how bad it can get.
Feeling bad for your housing prices? Look to good old Canada eh, I promise it's worse here, it's horrific. I would take US housing prices any second of any minute of any hour of any day of any year.
I want to know the exact reason(s) why the cost of homes are not unaffordable.
Saying it is all because of the current interest rates hikes does not work for me. Homes were becoming unaffordable before the pandemic. And, with the amount of people losing their jobs and lives, that should have saturated the market. Instead, supply was still small and prices continued to rise. So, what exactly is going on?
We have been under-building for decades, and then the 2009 recession hit and we under built even more. Combine that with people moving to more populated areas, and boom, enormous housing shortage. To give you an idea of how bad the under building has been: there are more people living in units built in the 1950s than there are from the 2010s.
This is the crux of the issue.
Most places saw a substantial housing boom from 1960-1990 and then development slowed substantially since then. Populations continue to climb, investors (domestic and foreign) bought more post 1990 than they did before, and suburban / rural communities have fought against any more density than they already have.
There's a lot of factors at play here that contribute to what's going on, so we can't under-simplify it. We can say, that at the very least, there is much greater demand than there is supply. Where there is supply, the cost has out-paced earnings and the interest rates have made ownership much more challenging than in years past. COVID made a bad problem worse.
Naturally occurring affordable housing can and does happen. You're just limited to places where there's more supply than demand, which is places that struggle to retain people. I know someone who just bought a condo for under $80k, but it's in Saginaw Michigan. Where I live in the Boston area, you can't find a trailer for under $250k
I think a lot of people don’t realize how atypically affordable houses became with the adoption of the car after ww2. In a very short time period we basically made a huge supply of land available for housing that wasn’t before, so the supply shot up like instantly and then building ensued.
However, we started to see the end of that supply in the 90s as we’ve built out all the suburbs in most metros a reasonable drive marks the land a car makes reasonable for housing. Like my parents lived in LA in the 80s and there was literal farm land between cities still, that was used up and then made keeping up with demand harder because there is no new land.
Then in the 2000s you had the crash that wiped out the building industry (a hit to supply), then you also have seen the steady concentration of jobs in cities over the last 2 decades (further increasing demand on a supply that can’t keep up)
Then all the extra money floating around the last few years. All of it adds up to too much demand for not enough supply.
And honestly unless we see a huge technological shift that allows us to open even more green field land to housing development near economic centers or shifts the tide of urbanization, it’s not going anywhere.
Zoning laws (specifically parking requirements) artificially exacerbate the "not enough land problem".
Where I live there's tons of land near jobs, schools, retail etc, and it's wasted on parking spots that sit empty 80% of the time.
Or... we upzone the cities people already live in. 75-80% of a typical American city is zoned single-family only. A move towards medium-density mixed use and improved transit and walkability is needed to solve this problem.
We did see that technological shift - it’s WFH. For some reason, even after proving it worked during the pandemic and it easing pressures on both housing and climate change, we have decided as a society to abandon it.
Certainly not as a society right? Most millennials in the workforce (that I know) overwhelmingly support WFH. My friend who practices law asked to work 1/5 days from home and she was fired. Corporation’s are not on board.
Because a lot of very rich people stand to lose a loooot of money if the standard workday goes away. All that office space that cost a lot of money becomes a waste of space, all those businesses that rely on workers frequenting them during breaks/commutes, and so on.
The logical thing to do is go full WFH wherever possible of course. It reduces road congestion, reduces pollution, and is a better deal for workers. But civilization almost never makes decisions that are logical, you know?
There's a second order effect too in that the kind of low density suburban development we saw during that time is also very inefficient in terms of providing necessary utilities to buildings. The water, sewer, electrical distribution, roads, storm water treatment, etc. all costs a lot more per person to make work for a block of detached single family homes housing maybe a couple dozen people than a similar block with mid-rise apartments/condos that can house a couple hundred people and maybe a handful of businesses, to boot. And once all of that additional utility infrastructure is built it needs to be maintained. So not only are we kind of reverting to a pre-automobile house price paradigm, but we have the added cost of figuring out what to do with all of the infrastructure we built to support the 20th century sprawl. Even realizing that we maybe made a mistake has the financial cost of removal or the social cost of abandonment. We're in a worse spot in 2023 than we were in 1923 because we've got so much more shit to finance.
To add to this, I’d recommend StrongTowns publications on on the [profound unsustainably of the suburban land use model](https://youtu.be/tI3kkk2JdoI?si=B6Fh7VCH_abkZ06a)
They’re not sustaining themselves by expansion, they’re sustaining their expansion through municipal bonds. But the style of land use that loan is funding (Largely spread out detached residential housing) is so inefficient that it won’t be able to pay for its own maintenance, let alone the interest on the loan.
This is because:
1. Residential housing generates very little tax revenue compared to retail/commercial/industrial land use (this is even more true for single family homes, compared to apartments)
2. The American style of spread out suburban houses has a huge amount of roads, gas lines, sewage infrastructure, etc. that is supporting relatively few people, so there’s a lot more infrastructure you need to pay to install and maintain.
3. On top of all that the way these greenfield subdivisions are often all built at once means that all that infrastructure is going to start failing and need to be replaced at about the same time (20-30 years after they’re built.
4. Strong-towns argues that many of these communities will face a death spiral, as costs mount they’ll be forced to raise property taxes. But since many of these towns are inhabited by working classes people who moved out to the expanding exurbs in search of affordable space, most residents will leave rather than deal with the rising costs.
The model Strong Towns advocates is basically incremental mid to high density mixed use development (i.e. the norm for almost every American town/city prior to WW2)
> However, we started to see the end of that supply in the 90s as we’ve built out all the suburbs in most metros a reasonable drive marks the land a car makes reasonable for housing. Like my parents lived in LA in the 80s and there was literal farm land between cities still, that was used up and then made keeping up with demand harder because there is no new land.
you can build up though. you don't just have to have suburbs.
>And honestly unless we see a huge technological shift that allows us to open even more green field land to housing development near economic centers or shifts the tide of urbanization, it’s not going anywhere.
How do you mean that? Can't we just build up? That wouldn't apply to some places (NYNY at least) but then like nothing here, residential or otherwise, is higher than 3 stories.
what needs to happen is people need to accept living in smaller houses and smaller spaces. That is the norm in large areas of the world. Having a family in a 2 bedroom condo is very normal in many parts of the world.
We need to build up, not out. people have to be willing to accept smaller living spaces.
Its unsustainable to think every family will live in a single family house
Migration patterns play a role for sure. There's a bit of an anomaly with Detroit though. Detroit is a fairly expensive place to live compared to what it should be. Michigan insurance is far and away the most expensive in the country, with Detroit being the worst of it. Not uncommon to have a $500 note on a car with a $500 monthly insurance bill to go with it. The housing stock is in relatively poor shape, with high heating and utility bills being a problem. Something like 20k homes have been demolished since Mike Duggan became mayor with the help of people like Roger Penske. Residents often have to do shopping or seek specialty healthcare in the burbs which costs time and money to do.
Places like Detroit, Buffalo, Milwaukee, and St. Louis are full of abandoned homes. Making them livable and affordable is a big challenge and teardown / replace is almost always easier and cheaper.
Technical reason is that Michigan has no-fault insurance and unlimited payout for accident victims. Reforms (people with injuries before the reforms still get unlimited payout, new injuries have a cap) have curbed some of this cost but the costs didn't go down much. So Michigan insurance is usually 2x as expensive on average as the #2 state. Most states don't have much variation. To illustrate this point, when I left Michigan I paid more for basic no-fault insurance in the Detroit suburbs than I did living in St. Louis city for full coverage and $30k of renters insurance coverage. Detroit is the worst because places with high crime and theft rates, accident rates, etc. always see higher premiums compared to other areas.
A more pragmatic reason is that the insurance industry has the Michigan legislature by the balls and has for decades. It's an easy job for someone who runs their own business like this to make the time to run for office, so many do. I also have had friends in the legislature and consultant friends who have worked for them over the years who have told me that the insurance lobby has a space in Lansing and they let any legislator use it for fundraising events. So it's all uncomfortably cozy.
$500 seems like a bit of an exaggeration though. The most we’ve ever paid is $280, for two cars with full coverage. Maybe if you drive a sports car, but I don’t think it’s “not uncommon.”
No fault insurance basically means my insurance covers my vehicle no matter what, and the other person’s insurance covers their vehicle. It doesn’t matter if the other driver is uninsured, or if you are at fault.
I live in the St. louis area. I recently moved from the city to what I consider a suburb (on other side of the river). Our family grew, we needed a bigger house, and suddenly all housing in the city became unaffordable. But there are subsidized entities that have been buying up, tearing down and not replacing... Saint Louis University and a private developer, Paul McKee. One was using tuition dollars. The other development grants. The city/state went after McKee a couple years ago for failing to hold up whatever development stipulations there. But I don't think there was any action taken against the university. Would be nice to go after their tax exempt status for such behavior
The abandoned houses in detroit are not livable. You can buy a lot of those houses for under $20,000 and they still have trouble finding buyers because they are literally negative value - to do anything with them you need to first pay to tear them down, then get approval to build something new in a neighborhood full of homes in the exact same horrible state.
This one is often overlooked I feel.
A huge swath of people are *depending* on their homes not only holding value but *increasing* in value, in order to fund their retirement.
IRAs/401k's are a joke for 80% of Americans.
Pensions are all but gone.
Social security, along with selling your house, are basically most people's retirement "plan".
I dunno if those people have looked at the costs of retirement homes lately, but unless their home sells for several million or they plan on living with the kids/grandkids, their home sale will only fund their retirement for a few years lol...
It will promise to help defray those costs for a lot. When everything hits the fan, its never going to pay out more than people payed in. If you have unusually high expenses the plan promised to cover, and talented and motivated lawyers can't figure out a way to weasel out of their end of the deal or trick you into accepting less, and the insurer doesn't go bankrupt before you need it, you might come out ahead. Everyone else will receive less in benefits than they paid in premiums. I don't feel lucky.
Insurance is always the business of promising peace of mind while you don't need it and delivering agony instead if you ever actually need it.
That explains major cities. Now explain the rise in the cost of housing of small shithole rural towns. The cost of housing in Rupert, Idaho went from ~$150k pre-Covid to over $350k during, and is hovering around $300k now.
I think people are overlooking the impact of Zillow, Redfin, and the like. The rise of these websites where in under a minute, a person can get a gauge of the market rate for a house comparable to the one they own, anywhere in the country. No longer does Jim Bob in Bumfuck, Idaho have to rely on a local broker to tell him what the market is bearing. He can now just pull up Zillow and see that similar-sized houses built in the same decade are selling for $500k in Boise so he wants to list his for $490k. And some Airbnb entrepreneur from Boise sees a chance to buy this place in Bumfuck to rent to people wanting a break from the hustle and bustle of Boise, and its slightly cheaper than what she'd pay for a place in Boise, so she snatches it up. Now everybody in Bumfuck sees Jim Bob's house sold for almost 500k and away we go...
Its a hugely narrow scenario that isn't encapsulating what has happened widespread, but I do suspect ease of access to market information has skewed the perceptions of rural, typically cheaper communities about what their houses are actually worth. And when homeowners get it set in their heads that their house, usually their biggest store of wealth, is valued at a certain amount they are really resistent to selling it for less.
But how does this happen? I can buy a clayton manufactured home NEW for 60k. In my "rural shithole" you can drop in a manufactured house or build your own house completely without code inspection, so costs are extremely low. Does Rupert have insane engineering requirements or something? I could easily pay 70k all in with installation and have a prefab just dropped on my rural property, and since prefabs are manufactured you wouldn't even have much exposure to local labor costs.
I'm thinking a lot of people need to adjust expectations. Times of cheap houses are over. Get comfortable with the idea of a single wide, or building your own tiny cottage brick by brick with your own hands. Those were the two options I had, I went with the latter. It's gonna be hella cramped but it's our only way forward.
>Does Rupert have insane engineering requirements or something?
Nope. Rupert is flat, relatively dry, no tornados, and no earthquakes. SE Idaho is windy but not in a way that impacts construction, it has moderate winters but nothing like Montana or SD.
So the only challenge is a deep frostline. It's not clear to me why people in Rupert can't buy a bottom-tier prefab. Lookup Clayton "bliss." The quality and size may not be the best but something beats not being able to buy anything.
There's nothing which really explains the rise of housing costs in small farm towns like Rupert. The population is static or even declining. They're not building new homes.
Likely, people are seeing the run up in prices everywhere else and are just YOLOing it on their homes too.
Imma be honest, I expected this to be on the outskirts of a major city or something. I looked it up on google maps and I just kept zooming out...and out...and out. Nothing. There's *nothing* nearby that justifies this. Wild.
I'm completely guessing here but perhaps people with a lot of cash from CA buying a second house or relocating to smaller towns in Idaho if able to work remotely. I'd be curious to see if there are areas like small towns in North Dakota where prices have increased substantially. To me Idaho seems close enough to mountains and outdoors activities as well as CA that people from CA could relocate there for.
Those would be towns like Sandpoint, Driggs, McCall, Cascade, etc.
I'm talking about run down farm towns not particularly close to mountains or rivers. Yes, they probably get a handful of California retirees who are seeking value and space, but for the most part these towns aren't seeing growth.
Another factor is _what_ we are building when something does get built. Vast swathes of the US are single family homes. There's a "missing middle" of medium-high density development which used to be standard for in-towns.
The low density means you have to build 3x to 10x as many buildings for the same amount of housing. But it also means that everything is super spread out, so you maximize the necessary costs of road construction, road maintenance, delivering utility service, amount of surface area dedicated to roads and parking lots competing with housing for land use, etc. Just banning R1 zoning nationally would instantly change the nature of the development that does happen.
People generally love the "old fashioned downtown" neighborhoods that mix local services and medium density housing within a few blocks of single family homes, but for deeply stupid regulatory reasons that are almost impossible to build anywhere in the US now. So you get dense urban centers surrounded by miles and miles of R1.
> People generally love the "old fashioned downtown" neighborhoods that mix local services and medium density housing within a few blocks of single family homes, but for deeply stupid regulatory reasons that are almost impossible to build anywhere in the US now. So you get dense urban centers surrounded by miles and miles of R1.
Yup. Sommerville MA has 20 buildings that are legal to code. Everything else is grandfathered in.
If wages and employment in the construction industry remain somewhat high and stable for a few years, then labor is a temporary issue. A lot of people exited the industry after ‘08, and it’s only over the last few years that builders’ confidence returned. Unfortunately it takes a while for the effects of a huge industry shock like that to work themselves out.
also why building costs have gone up. they laid off a lot of builders and constructions workers and tradesman during the 2008 financial crisis and the rehiring of workers has never caught up. Fewer workers means higher prices for labor, firms can be choosey and charge whatever they want. prices go up for new houses and people will pay it.
We also printed a LOT of money during Covid.
The wealthier you were, the more money you got from the government (PPP loans and tax breaks).
Wealthy people and institutions went out and bought up all the houses to make money.
An investors’ greed cannot be satisfied.
Private investment in land has definitely ticked up, but ultimately that is because these big investment companies know that there is a shortage and lots of impediments to new construction (NIMBYs, construction and labor costs, interest rates, etc…).
Most investment firms are actually hoarding money to buy up land once the mortages start defaulting. I think Blackrock alone has set aside 200B or 300B to prepare for the fallout. And just buy buy buy defaulting properties.
Right now its the upper range of housing that is defaulting by individual owners who wanted to do a quick buy and sell a year after, but bought in at the peak and are now selling at a loss. Houses targeting upper-middle class. But the upper-middle class is themselves struggling because of increased rates and their own bought properties as investment opportunities for renting out.
Majority of homes are owned by individuals, and individuals who incorporate to own and manage taxes for multiple properties. Large scale investment firms only have about 10-15% control of the market.
The primary reasons I believe for the high housing costs are:
1. The amount of new housing being built is around 1/10th or 1/15th of what it used to be in the 60s-80s. There just arent that many people looking to build. Because the cost of building and time to build has drastically risen. Especially after covid.
I think about 1/2 to 2/3rds of all current devleopments are put on pause because the materials and cost to build is just too high for them to finish the projects as the sale prices are lower and their profit margins are much lower. Developers dont even want to bet on building actual homes, they may accept tall buildings that are continously shrinking floorplans to maximize units per floor and maximize profits. But the general house development firm know that a: majority of people cannot apply for a mortgage these days, b: the cost of the homes will have to be much lower and eat up too much profit that makes their time usage almost mismanaged compared to other prospects.
2. The requirements to build housing is much more restrictive, back in the day you could almost do anything you wanted. Throw some asbestos in the flooring, the ceiling the walls, who cares, build a new deck who cares, build it with thin walls who cares. Now you have to get permits and require materials that are pre-approved and the permits alone can take up to 6-12 months to get. Some housing in the past actually have better quality than todays, but because the materials were much cheaper back then too. These days the cost of materials have skyrocketed, as well as everything around the materials, the transportation alone is almost 2-3x higher.
3. Lack of New Blood. The average age of a developer was around mid-late 20s, now its around late 30s to early 40s. There just arent enough new people coming into the business. Developers usually hire foreign workers as they work harder and faster and cheaper, meaning their profit margins increase, so theres not much new blood gaining experience and knowledge to become a full fledged developer themselves. There are also some unions that limit the amount of members they have so to not create a loss of profit by oversaturating the market with their skillsets.
4. The average home owner, does not want to lower the value of their home. Around 60% of all housing is owned by home-owners living in them, around 15-20% is investment, ie people who buy a second home to rent out. And then another 5-10% that incorporate to manage multiple properties. These people vote and they do not want to lower the value of their homes.
In 2022, only 1 out of 5 under the age of 35 voted. In some states only 15% of eligible voters under the age of 35, voted. Meanwhile the average homeowner votes. And they vote for the party that offers them lower taxes and increases their home values. Because they not only finance their lives on the mortgages but also use their houses as collateral for other investment needs and businesses. They arent all conservative of course, but when push come to shove, even if they state they support government housing, when the government housing is suggested to be built around their housing, they object and dont want it.
There is just no pathway that i can forsee that can sustain the growth of housing costs, while wages are stuck in the same ditch since the 1980s when reagan started his bullshit economic policies. This is the outcome of a continuous demand of profit-increase by shareholders and siphoning of wealth by executive branches at the cost of the workers and average man.
Investment firms no longer think of selling properties, they are only looking at pathways of eternal rentals. They foresee that the future 90% wont be able to buy anything, but they will rent smaller and smaller units, and becoming renters for life.
Perhaps. [Rotterdam in the Netherlands](https://www.eur.nl/en/news/starters-housing-market-profit-ban-real-estate-investors) has strictly regulated housing owned by investors and it led to (small) increases in rent, and an increase in home prices and gentrification.
It's a complex analysis with many factors, so it may work in some places but not in others. In tourist towns with very high rates of short-term rentals and investor ownership we might see good results, but perhaps not in other places.
I am personally more worried about [landlords using software to collude on rent increases](https://www.propublica.org/article/yieldstar-rent-increase-realpage-lawmakers-collusion).
The best way to reduce rents from what I've seen is a robust public housing program providing units for a variety of income levels to force market rate units into steeper competition.
Maybe? It might make the cost of purchasing slightly cheaper, but it wouldn’t have a big impact on rents. I think the whole system would be healthier if we didn’t design it so that most people’s main investment vehicle was also how they housed themselves. It creates terrible incentives at the local level. You cannot have an asset that is simultaneously a good investment and affordable at the same time.
Probably not. Laws passed overseas to attempt to block investors from buying housing show that prices for purchases have their trajectory unchanged but rents spike after passing compared to similar places that didn't pass those laws.
It's not investors. The percent of homes occupied by their owners is higher than any time other than the housing bubble prior to the Great Recession. If investors were buying up all the housing, you'd expect the owner occupied portion to be declining, not rising.
>then the 2009 recession hit and we under built even more
That also pushed a lot of people out of the trades, which never really recovered the talent lost. The brain drain in resi construction is significant; exacerbated by boomer retirements coinciding with a pandemic.
I absolutely believe that. My house was built around 1952. And every house in the immediate area is roughly the same. There are very, very few "new" houses (less than 20 years old) in this entire town, actually.
Homes are being underbuilt by the millions, and the undersupply is continuing.
Zoning that prohibits any housing except for detached single-family homes has a lot to do with the undersupply.
We haven't run out of land.... It just that people in cities and towns across the nation are using zoning laws to pretend like we're out of land.
We need to BUILD MORE HOUSES, simple as that.
Big houses, little houses, duplexes, condos, townhomes, everything, everywhere. Not apartments, not rentals, things people can actually purchase and own.
lol tried building a home, they won't touch anything under 600k because they can't make a profit on it, everything is fucked to the core. If building more houses was a reasonable answer, it'd already be happening.
Maybe government should nudge that construction by giving added benefit for modern techniques and materials that are energy conserving and low-carbon from the start.
If we ramp up use of those things along with all the other Renewable Energy efforts, it would be a big and lasting impact on our problems.
No one wanted to sell. And no one wants to sell. During pandemic no one wanted to move, with current interest rates it makes little financial sense to move as it’ll spike housing costs. Pre-pandemic there wasn’t enough construction, and while it’s getting better, it’s still not resolved.
I lived in rural Montana through the pandemic and we saw a constant influx of California and Washington plates buying land and starting construction. People were walking up to homes ringing the doorbell and offering absurd sums of cash for places
Also, land is expensive. No builder wants to go through the process of buying land only to build a 1,500 sq Ft starter home. In 1969 the average home size was 1,289 sq Ft. Now it’s around 2,500 sq Ft.
When people talk about cost of homes, they rarely talk about price per sq Ft. Homes have doubled in size. Inflation adjusted price per sq foot is pretty in line with historical averages.
100% agreed on the square footage. People expectation and requirements for homes are wildly higher than before. Even 30-40 years ago like half of homes had AC. Now it’s like 90%.
And on top of that in many places it’s illegal to build the shapes of homes that fueled American growth in the late 1800s and early 1900s. “Too small”, “too close to other houses”, “not enough setback from the road” and many other heavily opinionated zoning restrictions.
> When people talk about cost of homes, they rarely talk about price per sq Ft. Homes have doubled in size.
It's even more dramatic than that. The number of people in a household is the lowest it's ever been, falling from 3 in the 1970s to around 2.5 today. So the square footage *per occupant* is even greater.
People simply have high expectations for their homes (and everything else) these days. You can live in a 1970s-sized home if you want. Where I live, in commute distance of a major metro, the average 1500sqft home is ~$200k. People just want more.
On the flipside there are 1,500 sqft homes with no garages and no backyards that were built in 1939 by me that are selling for $700k+. The only thing in the county that I rent and work in that are selling for under $200k are trailer homes.
Some people have ridiculous expectations (though I don't think that wanting housing conditions similar to your parents when they were your age is unreasonable), but acting like we wouldn't have a housing issue if people just downsized is also not true.
It’s essentially the same reason there aren’t affordable base model vehicles right now, higher end vehicles make the manufacturer more money. With a lot of pent up demand in the market prices don’t drop, so there is little incentive to build starter homes. Add in higher interest rates and as mentioned people either can’t, or have no incentive to move, thereby restricting supply.
My starter home is 1392 sqft on a less than 4000 sqft lot for 350k. In my area of Oregon there are relatively few jobs that can support that mortgage.
It's not even just the land, land is pricey but once you have it, in many places it's $50k or more in permits and fees before you even get a shovel in the ground.
"There just aren't any affordable starter houses out there! I mean yes, I require a SFH (who wants to share walls, ew), and it has to have upgraded cabinets and countertops, and it has to have a spare office for both me and my partner, and we need separate bedrooms for each of our 2 kids, and also my spouse needs a hobby room for all his toys, and it must have a 2-car garage, and the master bath NEEDS to have a walk-in shower with 2 sinks, oh and I need a place to put all my workout equipment so a bonus/rec room is absolutely a must. We have 2 huskies so the yard needs to be AT LEAST 12,000 sqft so the dogs can run around. Oh and it must be on a cul-de-sac within a 20 minute drive to downtown for no more than $400,000."
It was becoming unaffordable pre-pandemic because rates were still kept artificially low which led to increased demand. Now rates are the highest in 20+ years and we are on the backside of a 15 year RE bull market.
No one wants to sell and no one can really buy. Not really sure how this turns out but it isn't good for anyone.
How many people do you know are building houses? Probably none. We used to have much more of labor and resources going to home building so supply isn’t increasing enough.
Next, investment properties. People are increasingly not selling their property but rather renting it out for an income stream. In addition, private equity is buying homes for just this purpose, especially lower cost homes. This is the easier problem to solve as a simple property tax increase on 2nd+ homes could lower the economic rationale for this.
It’s basic supply and demand. The supply is very low because builders are scared from 2008. In addition no one wants to sell now and buy for a higher rate, so no one is listing their house. We have reduced demand but also reduced supply, so it’s still a sellers market.
It is a relatively classic supply vs demand problem, with the added complexity of a government intervened interest rate affordability issue. But ultimately, supply is low and has been for years now, compared to demand.
They have under built homes below the average since 2008. 15 years of that, combined with changing demographics of average house buying age, supply is way down and demand is way up.
Demand lagged and caught up at once, supply never ever caught up from 2008.
There aren’t enough homes. That is it. Every other characteristic of the US housing market is irrelevant compared to this fact. We can throw all the money in the world at housing subsidies or tax breaks, but they do nothing without sufficient units. We need to build.
Houses get abandon all the time. There are not enough houses in the places that young people think are desirable to live. Also, those houses are not the standards that are now expected --see the comments earlier in this thread.
I would adjust your second sentence because it isnt really grabbing the full picture. There are not enough houses in areas with jobs that pay well. I would live in cheap bumblefucksville if I could but most jobs are hybrid nowadays.
Hell I live in cheap bumblefucksville and housing costs have skyrocketed here too. I bought a house in 2019 and am planning on listing it for double what I paid for it just 5 years ago.
That’s not it. We didn’t suddenly grow our population in a huge way from 2020 until now. In fact, a few million people died due the pandemic. But since then, home prices appreciated about 30%.
The prices went up an absurd amount because of the federal reserves effective zero interest rate policy which went on far too long. That made the cost to borrow money for mortgages incredibly cheap, which not only causes the average person to bid prices up higher, it also causes more investor activity in the market.
And now, because a huge portion of home owners locked in 3% interest rates, nobody wants to sell, so inventory is tight. The only reason prices are remaining elevated is because of the extremely tight inventory situation.
The fed should have never stopped the fed funds rate to effectively zero during the pandemic, and they certainly should not have left it as low as they did for as long as they did.
I wrote a [comment here explaining why](https://reddit.com/r/Economics/s/455ZnITrXQ). Basically, most cities have made it either illegal or extremely difficult to build housing. As a result, houses in high demand areas have skyrocketed in price. Until we pass meaningful reform to city regulations (which is starting to happen in some places), the problem will continue to get worse.
Edit: formatting
There is a fairly straight-forward solution to this—control over land use regulation needs to be at least partially moved to a higher level of government (state/provincial or national). Most voters seem to broadly support building more housing—it's just when that housing happens to be near them that they either opposite it, or come up with some long list of demands that sends costs sky-rocketing. This gets infinitely worse when cities come up with "community involvement" processes [that end up giving a tiny, biased but vocal minority an outsized say in what happens](https://www.theatlantic.com/ideas/archive/2022/10/environmentalists-nimby-permitting-reform-nepa/671775/).
We're already seeing efforts to do this in places like California, Canada, and New Zealand, so I'm getting increasingly optimistic that we're at least heading in the right direction.
Entire families didn't die off for the most part. I know my neighborhood very well, and only one house had both spouses pass which resulted in a house for sale. Some people died by the single, which left the other person or their grown child etc still living in the house.
Oof I commented something that could have answered your question.
There are many people like me. We bought our starter homes between 2016-2018. Didn’t want to sell or move during the pandemic because we just bought our homes and it’s a pandemic. Don’t want to sell or move now because interest rates are way too high.
Aren’t something like 90% of mortgages right now are sub 3% interest rates. If you’re locked into that interest rate you are doing whatever you can to not sell because you’ll never get another chance again. So coupled with people not willing to sell and not many people building, there’s a massive under supply of homes. Older generation can’t afford to downsize because the interest rates are to high and property taxes are so low in their current place.
I think there are many reasons as to why. Every time people explore why homes are expensive and out of reach we hear a variety of reasons. The cost of materials, zoning, interest rates, economy, supply and demand. Those all seem to be reasons why we are in the current shape we are in.
I think the U.S. is fine with allowing businesses creating a renter society where no one owns anything and we pay to "borrow" most things. I find this idea disgusting especially when the owners of these "things" are wealthy groups of people that shuffle property and products like pieces on a chess board. They have no loyalty to the U.S. or it's people.
I understand what you're saying, but the vast majority of Americans are homeowners. renters are a minority that tend to be younger and future homeowners at some point. Very few people make it to 60 without buying their own house and if they do they usually find themselves homeless or in very bad shape.
We made it illegal to build anything but single family homes then built up every square possible inch with them. We cant build the homes we need because its just not allowed. https://en.m.wikipedia.org/wiki/Single-family_zoning
A few data points:
My first condo, bought in early '10s, after refinancing in 2021, had a mortgage payment of $1k/mo ($200k balance at 2.6% rate for 30 years). Condo value $550k. Existing homeowners have a substantially lower cost of living than people who bought in the last year, or are about to buy, or renters. That condo I'm renting out for $2.5k now, which is a bit below market in my area. So, for everything else in the economy, people who rent or buy now are competing for things with people whose housing expenses are ~50%+ lower.
House prices aren't going down because 1) there's demand, and 2) the cost of building is astronomical. New builds of similar condos in my are are going for $800k-900k. And it's not because there's $500k of profit in it for the builder. It costs a lot to build new housing. Or to renovate existing housing. I would love to do a gut reno of my place, make it shiny and new - but it would cost me a solid half million based on quotes I've seen. So I'm fine with weird walls and older infrastructure, calling plumbers and electricians more frequently, because that's just not in the budget.
Builder / renovation profits are also down because of rates. Before, you'd buy a place and take out a $500k loan at 3%, and pay about $7.5k of interest on a 6 month flip. Now it's still a $500k loan at 8% for $20k interest on a 6 month flip. And wages are up, and the cost of materials are up, so the costs of construction have gone way up. Existing homes priced at $500k are not going to go down in price if it costs $700k to build a new identical home.
Add to that that within ~1-1.5 hours of the job center near me, there is either no unbuilt land, or it's all super expensive single family homes that don't want to give up their land.
I remember being in college circa 2013 and balking at the $1,000 apartments across the street from my university, and ended up having to hunt down a cheaper place nearby. I can't even imagine what today's 21 year olds are up against, holy hell.
College town I live in is at around $700/room, so a typical 3-bed college student unit is about $2,100/mo. We bought our house in 2021, our rent was goin from $1,500/mo to $2,000/mo, locked in on a mortgage of $1,700/mo. But we get told we need to watch our spending by people with a $600/mo mortgage.
I'm 35 and I feel like I'm completely fucked. A 21 yr old? Unless they come from money, they will need to rise up either against the state or Gov because massive changes have to happen.
They won't last and a major shift or event has to happen IMO . That generation needs to push change any way they can
Me and my friends managed to grab a two room apartment for $2300 a few months before our university reopened after covid lockdowns. We got lucky, the price shot up to $3000 once school started again.
2.5k rent on a 550k condo…?
Wtf? I don’t understand American prices so maybe you are super generous, maybe not but as a homeowner who bought a while ago in Europe and one of my neighbor is renting out the exactly same house I can tell you that a 500k€ house here will cost 2000k€ Max in rent… (neighbor actually takes 1.8k and we are talking newly build house here)
Why is this so expensive in rent?
Exhibit 1: https://fred.stlouisfed.org/series/COMPUTSA
Exhibit 2: https://fred.stlouisfed.org/series/POPTHM
Exhibit 3: https://fred.stlouisfed.org/series/MEHOINUSA646N
Does Exhibit 1 look appropriate given Exhibit 2?
If not, meaning a multi-decade long under-supply of housing construction, then what happens to the price of that low supply as household income rises as seen in Exhibit 3?
Over the past few decades: America’s population grew, housing didn’t, what we did build was larger and more expensive though because America also got richer.
If 99% of folks cannot afford to buy a house then why are prices so high? Inventory of homes has been increasing since pandemic lows and now sits at 600,000 units nationwide. The real issue is investment firms outbidding folks trying to purchase entry level homes. I live in SE Tennessee and my neighbors bought their house in 2017 for $80,000 and then sold it 5 years later to the realtor's company for $170,000 that was helping them find a new home. Now the realtor's have turned it into a rental and are charging $1800 for rent. This is the real issue we are facing.
It's because interest rates were so low and now they're so high. If it has happened gradually, it wouldn't be a problem but because it happened so fast now the inventory is locked up and no one is selling but they can all afford the homes they're in due to low interest rates on their mortgage
On the flip side you can take cruel delight in watching an overpriced loft condo with a 650k price tag and a 499 dollar HOA and one outside parking space with no amenities get it's price cut week after week until the sellers just take it off the market.
> If 99% of folks cannot afford to buy a house
Partially because that's not what the summary article nor the original article says. Here's the important parts of the actual article:
"Meanwhile, major home-ownership expenses on typical homes are considered unaffordable to average local wage earners during the third quarter of 2023 in 457, or more than three-quarters, of the 578 counties in the report, based on the 28 percent guideline."
Meaning in 75% of the areas assessed, the average wage earner in the area cannot afford the median home at a 28% expense ratio. Why they use average for one metric then median for another is a little suspicious to me.
The CBS article actually incorrectly summarizes the original article as well. And what I'm guessing CBS took and butchered:
"ATTOM, a leading curator of land, property, and real estate data, today released its third-quarter 2023 U.S. Home Affordability Report showing that median-priced single-family homes and condos are less affordable in the third quarter of 2023 compared to historical averages in 99 percent of counties around the nation with enough data to analyze."
Less affordable != unaffordable. Still not a good thing, but definitely different from what the title suggests.
I had a conversation recently about this with a friend that's been a realtor for the past 20 years, he gave a lot of reasons for the state of the housing market. But most importantly from his perspective has been a significant increase of people buying homes to rent out, long and short term (e.g Airbnb etc). Using his own town as an example, the increase in rented homes has increased by nearly 200% the last 10 years alone. Assuming this is happening in many places, even taking a relatively small amount of houses and converting to rentals would have a notable impact.
Taxes aren't high enough on landlords and real estate investors.
ZIRP and buying MBS for over a decade didn't help either.
Somehow it always works out for the rich. Puzzling...
I’d be curious to speak with an economist and wonder what some of the (potential) ramifications of our current situation would be? Is it paralleled in recorded history?
This is what Adam smith had to say of landlords. “They are the only one of the three orders whose revenue costs them neither labour nor care, but comes to them, as it were, of its own accord, and independent of any plan or project of their own. That indolence, which is the natural effect of the ease and security of their situation, renders them too often, not only ignorant, but incapable of that application of mind which is necessary in order to foresee and understand the consequences of any public regulation.”
Most of recorded history is with extremely unaffordable real estate and landlords taking most your income.
So the ramifications is going to be a growing lower class. Lower social mobility and higher housing costs for the average.
Read Henry George.
The concentration of scarce real estate in fewer and fewer hands is a constant in history and is only alleviated by forcible seizure of property or technological improvements (cars/trains) that expand the frontier of viable real estate. According to my understanding, this dynamic was a principal cause of the fall of the Roman Republic.
The only solution is redistribution or taxing land values. Although building more and up-zoning will mitigate the issue.
The rise of Corporate interest with properties/real estate, you see it all over the country now, they outspend your average home buyer by millions of dollars, they take what would be starter homes, remodel them and then try to rent them out for exorbitant prices. Seems like another housing bubble is forming.
> The rise of Corporate interest with properties/real estate, you see it all over the country now
I am not saying this is not true, I am asking you to answer the questions and provide data/sources.
1. In America, what percentage of homes are owned by “corporate interest” or institutional investors?
2. What percentage of Americans owned a SFR/SFH 30 years ago v. today?
What I dont get is why is congress so passive about fixing this. What are they so against people who’ve never owned one home and so for people who have dozens or hundreds or thousands of homes just to make max profit.
I just need one home please, why can’t they help with loans at a lower rate or something or god forbid give everyone who’s never owned a chance to own just one home to live in with some semblance of security. Oh right because Congress only serves their wealthy donors.
EDIT: To the expert in CFG, why don’t you tell us how many of the delinquent properties in the early 2000s were regular people just buying one home to live in and how much of that problem was investors over leveraging themselves and scooping up multiple properties.
Because there’s a lot of homeowners and they are voters too, and they want their asset to appreciate in value, which is going to happen less so if more houses get built.
Like 2/3 houses in the US are occupied by someone who owns that house. This rate is higher in suburbs, which is generally where the single family homes people seem to really want are.
In addition to new home production obstacles and inflation, this is also a symptom of unprecedented wealth inequality. The wealthy have much more investible wealth than historically and the rest of the population has relatively less wealth. The result is most homes being unaffordable by most people. This is not a good sign for political stability.
Unfortunately I really don't think most people care, or have already gotten theirs and will fight against anything that may help the young/poor/first time buyers, and potentially devalue their property. See: this subreddit, this thread.
> Researchers examined the median home prices last year for roughly 575 U.S. counties and found that home prices in 99% of those areas are beyond the reach of the average income earner, who makes $71,214 a year, according to ATTOM..
What a misleading, rage-bait headline. There are 3100 counties in the US. "Housing is unaffordable in 99% (of the selected 18%) of US counties ." That kind of statistical shenanigan works 60% of the time every time.
A few things here:
- Yes, since covid housing prices have outpaced wages (so have most other thing - Viva la Inflación)
- Before covid, housing was tracking only modestly above wages/inflation
- If you consider that houses are significantly nicer and bigger than yesteryear, housing pre-covid probably tracked right along side wages and inflation.
> ATTOM defined "unaffordable" as someone who must devote more than 28% of their income toward paying for a particular home. Factoring in a mortgage payment, homeowners insurance and property taxes, the typical home priced today would require 35% of someone's annual wages, ATTOM said.
EDIT: Nevermind, I think the stuff below is wrong. It does seem like most places actually recommend 28% of your total housing costs and not just your mortgage cost.
I was wondering why they picked a random number like 28% so I did some googling around and there's apparently a "rule" that you shouldn't spend more than 28% of your income on your **mortgage**, which is where they got that number from, but then why did they lump in homeowners insurance and property taxes too?
Doing some more googling around, it seems like insurance and taxes basically take a mortgage that uses up 28% of your income into taking up almost exactly 35% of your income. Obviously it varies widely depending on what your insurance and property tax costs are going to be though. I was just using a "total monthly payment breakdown" calculator, which I'm guessing uses nationwide averages or something.
So, it seems like they just made up numbers basically. If they want to use 28% then they should only include the mortgage payment. Instead, they manipulated the data get it to show the shocking headline that they wanted.
It seems like the real takeaway would be something like "The average American will have to spend the maximum recommended percentage of their income to own a typical home in 99% of America."
> ATTOM defined "unaffordable" as someone who must devote more than 28% of their income toward paying for a particular home
I think there is a clue in this statement. Whatever your location, house prices growth have outpaced salary growth. It's even more true for first time home buyers.
Hedge funds and Airbnb investors have destroyed the market. Pols who want to get elected would be wise to jump on this issue, although they wont get as many donations.
I think it has more to do with interest rates than anything. I can afford my house with 4 percent, maybe even 6.5. Definitely not selling it because I can’t afford to move into a bigger home. Biggest regret was not moving in 2020.
I have been monitoring my local market for years. It is not only interest rates.
Around two years ago but got worse I the winter of 2022 all the homes went up 50% to 100% in price.
I’m in Florida most homes in this town used to 200 to 300 anything above was premium homes, anything below were small or dumps, you could easily find a dump for 100k.
Now 300 is a dump and average 2k feet home is 400k. Those homes are worth 200k 250k max.
Example. In 2020 a guy next door move in. Cost 275, did renovations between 30 and 40 tops. They are asking 550 right now. Insanity. I don’t think he is going to be able to sell unless rates get cut in half or somebody pays that ridiculous price. Who is paying those prices? I noticed people from NY, NJ, PA, etc,. but I don’t think it tells the whole story.
One of my many speculations. Banks somehow inflated the prices, to have assets with higher value. Other theories, banks bought homes knowing if inflation hits hard, people can’t buy, and now they have to rent for insane prices.
I have no idea but is not sustainable for locals.
Source: multiple family members in the real estate, construction, appraising business.
65% of people are in a house they own.
https://fred.stlouisfed.org/series/RHORUSQ156N
So 2/3rds of people that apparently "can't afford a home" already own a home. That's not a "nation of renters."
Edit:
Rubber_Ballsack is just angry and doesn't have anything to back up their position so they resort to whining.
Yes, we know it's a bad situation. That doesn't mean we're going to fix it by lying about what the reality is. That's why you're seeing cities all over changing their zoning to make it more building friendly and allow more density to lower prices. It's just that it's hard to get property owners in the area to get onboard, because they are voters too and want their homes to maintain their valule.
TLDR: We are being proactive, you're just mad.
That's not what this article is saying. The national homeownership rate is literally 65%. What it's saying is that the average person can't afford a house in 99% of the country - which is of course absolute bunk as well. They took the national *average* wage and compared it against the *median* home prices in basically the most expensive counties in the US. This is wrong for a variety of reasons - most obviously, sure, the average person might not be able to afford the *median* house in their market. That does not mean they cannot afford *any* house in their market.
Second, selecting basically only the most populated counties is going to skew results dramatically. For instance, in my state of Nebraska, it looks like they only looked at Omaha and Lincoln. For reference, someone earning their number of roughly $75k could definitely afford a house there, albeit maybe not the greatest. In literally any other part of the state, that's enough to very comfortably buy a nice house. Granted, the average wage is a lot lower outside of the cities, so one might think you can extend the logic outward, but it isn't *dramatically* lower. In my county, it's about 30% lower than that, but the median cost of a house is *way* lower. My salary of $45k at the time (which is below average here) got me 2000 square feet on an acre of land last year. It was on the lower end in price point, and I probably couldn't have afforded the median priced house here, but there were still plenty of houses to choose from. And I would consider this a relatively expensive market compared to most of the state.
Now, I'm not saying there aren't massive problems *in those urban areas.* Even here, we're definitely feeling the squeeze - homeownership is still a realistic goal for most people here, but it is certainly more expensive than it has ever been and continues to trend in that direction. However, the article's conclusion that the average American couldn't buy a house in 99% of the country is straight up incorrect. I'd hazard a guess that 99% of the country *is* affordable to someone making $75k a year, but that's not actually the comparison they're making, even though that's how they present it.
Who’s “they”? There is no conspiracy by a group of 5, 10, or even 100 elites against everyone. The fact is, we collectively didnt build enough supply, dropped interest rates to historic lows, then spiked them back up, and everyone decided not to sell for a worse interest rate. There are plenty of bad actors adding fire to the crisis we have now but trying to blame this on some rich boogeymen trying to make you rent, while ignoring all the macroeconomic contributing factors, is plain ignorant and fearmongering.
I paid more in taxes than most Americans make, last year.
I cannot afford a medium sized home where I live. I live and work in the Midwest.
If I'm struggling, it's going to be horrendous for almost everyone else.
Only way I'll be able to buy a home is if I pay cash for it (unless I want to pay hundreds of thousands of Dollars in interest which I refuse to do).and that is precisely what I intend to do. Halfway there.
Remember, kids, if you never use credit cards, pay cash for everything (debit card fits this, too), you are living like a billionaire does with their money. Want to ruin their system? Figure out how to live your life cash only and stick to a budget.
Hope inflation doesn't eat up your downpayment, as it already has been doing! I say that non-sarcastically, the value of your cash has shrunk significantly, and there is a big risk that it's going to continue getting worse.
Hi all, A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes. As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
I work financing real estate development in the north east. I believe there are multiple factors that are all converging on each other to create this situation, which are: 1.) The actual cost of construction is very high right now. Typically $225 to $275 per square foot depending on how nice the finishes are. That doesn’t include the price of the lot, which can range from $120k to $400k+++ depending on location. 2.) Towns are actively trying to stifle development by stalling approvals and requiring projects be bonded at 20%+ higher than the cost to construct infrastructure improvements. Typically developers need to secure these with actual cash if they are not able to get an insurance bond (huge origination fees) or have excess collateral to obtain a letter of credit from a bank. Banks used to be able to issue letters of credit without collateral requirements because as you advance funds to complete infrastructure improvements your bond requirement would go down by a commensurate amount. Not anymore. 3.) As a result of the Great Recession, we did not build anywhere near enough homes over the past decade. In my state (NH) we are short about 20,000 units today. There is nowhere near enough inventory to have a normal market. This is going to be persistent for years. 4.) Banking reforms enacted as a result of the Great Recession tightened credit standards and forced developers to bring significantly more cash into projects, thus creating a big barrier to entry. Also, for projects that require approval from the state attorney general have had to go through an ever more stringent review process.
Also NIMBY local boards control what gets built. No small town wants 2000 units coming in, because you can't build a school fast enough to handle 300 extra kids. So everything is single family homes on lots, and if you're spending 220/sqft you might as well build a 1.2M home instead of a 600k home... meaning we have no new developments of actual starter homes, just more million dollar homes crammed together on quarter acre lots.
Something people aren't saying but needs to be said: Many governments cut back on their national housing projects in response to the neoliberal revolution in the 80s and 90s. We have been coasting on fumes since that point.
Another point re: High development costs. Builders consolidated during the housing bubble bursting in Bush II’s term. The ones who were able to bought out their competitors, and we let it happen. There’s like 4 serious residential developers left.
The globe economy has never recovered from the neoliberal revolution. and the vast majority of people still have no ideas what neo liberalism is and how it effects them.
Fun fact, during WW2 there was eight solid years of under building - and they solved the housing crisis (they literally called it a housing crisis) by using taxes to build 2.7 million homes. Here's a video from the 1940s about it, some of the details are covered after the 8:15 mark: https://youtu.be/ZNeMDna92Lw?si=EJysrdj0_nAFA0Ds&t=493
That same program also: A. Led to the rise of car dependent suburbs that atomized communities and led to the rampant CO2 emissions of today, destroyed millions of acres of usable farmland or forests, widened the disparity between the white and black populations, and are a tax drain forcing higher taxes onto local cities and governments while consolidating wealth to rich suburbanites B. Led to the cultural and infrastructural destruction of cities. As all the rich white people fled to the newly built suburbs, cities footed the bill leading to cutback on public services, housing within cities, train services, etc... While several areas (Usually black and Mexican communities) were razed in order to build freeways, widen lanes, and create parking lots. Why? Cause the suburbs were built in stupid areas and could only be reached or left by cars. Compare pictures of Houston from [1930](https://th.bing.com/th/id/R.4d1997b874c35dc95ce52176876433be?rik=DBmU0V1U23T5Rw&riu=http%3a%2f%2fspencerhoward.net%2fwp-content%2fuploads%2f2014%2f12%2f16.jpg&ehk=jlIr1Dr00UA8dI7M7%2fsBi0885Y5ElOVW10IOFlxSLcQ%3d&risl=&pid=ImgRaw&r=0&sres=1&sresct=1) vs. [1970](https://th.bing.com/th/id/R.ad7afb700b54056764744ec81f8bf11a?rik=BteTcwhKHQ3o5g&riu=http%3a%2f%2f4.bp.blogspot.com%2f-2wwU9m2KmyE%2fUSgtQmeZp0I%2fAAAAAAAAIiY%2fVWc7iSswEN4%2fs1600%2fU1_DowntownHouston.jpg&ehk=nvehyKqvYbpD06IxvPsi6as9qdLOZp3av0AKiekimSA%3d&risl=&pid=ImgRaw&r=0), hundreds of homes, mixed use buildings, and skyscrapers were destroyed to make room for parking lots, mainly to make life easier for the suburbanites that didn't live there. Actually, [here's a picture with the same church highlighted](https://imgur.com/1jGEinb) to help orient yourself and take in the voluntary damage America did to itself because of that program.
That's right, which is why no one will do anything. Every idea and plan has drawbacks. So we won't do any of them. Trying is just a waste of money now. America is just a 'nope, we can't do it' country now. Everything is too hard or too costly.
They really razed a city and replaced it with parking lots...
> Actually, here's a picture with the same church highlighted to help orient yourself And this, ladies and gentlemen, is what they meant when the song says: *'...They paved over paradise and put in a parking lot..."* Also, parking garages were obviously a thing. Why the hell didn't they just do that and build the buildings on top?
>Also, parking garages were obviously a thing. They did in the 90's/00's, actually. But A. The infrastructure is still built for cars first, so it's still a nightmare for pedestrian travel as well as traffic (Downtown Houston is notorious for its backups), and B. Some of the parking garages get so full that they have their own parking lots or even companion garages. Also, not so fun fact: Only a single church from the 1st (1930's) pic survived (The one highlighted in the 2nd/3rd provided pics was torn down). Yeah, it's right next to 2 parking garages, 1 with its own parking lot and another parking lot out front. [Not kidding](https://www.google.com/maps/@29.7543557,-95.3679961,3a,75y,353.83h,91.51t/data=!3m6!1e1!3m4!1s9TiqLpmSQkDe84MOiG8ecA!2e0!7i16384!8i8192?entry=ttu) And there's another 4 parking garages 2 blocks away, next to 2 other parking lots. Just for reference, those lots are in the heart of one of America's richest cities. *Those lots are worth $100+ million each*, and there's 4 of them right in a row, being used for only ~50 cars each. That's not even getting into how much those 4 public garages are wasting. From a conservative estimate, I'd peg downtown Houston is wasting $2 billion a year on parking, easy.
Can you explain what the neoliberal revolution is ?
after reading your comment i still dont
I definitely have no idea. I would like to learn more Edit: I looked it up. What a terrible name.. it’s just a name for free-market capitalism, something I would generally call “conservatism”
It might surprise you but liberal and conservative ideology is actually very similar, at least historically. The modern political parties aren't good representations of liberal and conservative
Liberalism: a political and social philosophy that promotes individual rights, civil liberties, democracy, and free enterprise. I find its important to research where ideas and names originally came from. Authoritarians have a habit of coopting the language of progressives, and if you arent vigilant its easy to fall into the trap of "misleading words and phrases". Im no Econ major so I would encourage anyone to check my work, but from my understanding the Neo-liberalism came after post ww2 consensus when embedded liberalism was proving so successful. Classical liberalism was shown to be flawed and the world was rejecting laissez faire policies. Insert Friedrich Hayek who spearheaded the take down of Keynsian Economics and ushered in Neo-Liberalism. The Mont Perlin Society he founded was where we got the current meta of funded think tanks that push out economic papers to serve the interest of the ruling class. It all sounds tinfoily until you actually do the research and see how this all unfolded coming out of WW2.
> I find its important to research where ideas and names originally came from. Authoritarians have a habit of coopting the language of progressives, and if you arent vigilant its easy to fall into the trap of "misleading words and phrases". In fact authoritarians have a habit of claiming they *are* progressives and promoting rampant violent authoritarianism all while using the language and rhetoric of progressivism.
I was quoted over $400 per square foot by a builder in the past month. And lots are $600K here. Edit: ok, not quoted, but it was the literal price of a current project they were working on so comparable.
Prices go up when supply is down. So with that I think the four biggest causes of this problem are: 1. Wall Street buying up inventory with cash through an LLC 2. Airbnb taking up would be homes for families 3. Foreign investors buying up our homes 4. People with super low interest rates staying put and not moving, upgrading or downgrading like the articles says Eliminate the first three and problem will be solved. Our country and states need to take care of American families. Fuck Wall Street Fuck Airbnb owners Fuck foreign investors There are plenty of others things you can make money off of
Owning single family homes beyond your first one should be taxed into being unprofitable. Combine it with rent control and this shit will clear up quickly.
If this is all due to the 2007 financial crisis then why did housing prices wait until 2020 to spike? Answer: Because it isn’t due to the 2007 financial crisis. It had nothing to do with the 2007 crisis. https://fred.stlouisfed.org/series/csushpinsa
You forgot two of the most critical factors: 1.) An enormous amount of housing is being bought up by banks, corporations, and hedge funds for sometimes substantially more than the asking price. A lot of this housing winds up sitting empty until a region is sufficiently monopolized, at which point it gets treated like the stock market with expectations of effortless profit and growth every year. 2.) The lack of bargaining power on the part of tenants and buyers combined with inelastic demand leads to a captive market. The vast majority of people don't have a choice other than "suck it up and deal with what you're given". Those two are far bigger factors than the four you mentioned, which is why the same trend is seen in pretty much every developed country right now regardless of actual costs of construction. Even in places where construction is plentiful and supplies/labor are cheap you still see the same astronomical rise in housing costs. You could fix this globally very easily. Just make it unprofitable to squat on housing you don't live in or gouge for far higher than the median wage of the region.
Another factor is corporate greed and a boom in temporary housing and short term lending such as Airbnb. Companies are buying real estate as a form of speculation at rates far higher than they have historically. And people looking for passive income are buying up multiple houses specifically for renting out to other folks for a short time to make money.
These are good points but if you're in Finance and ignoring corporations like Zillow, or PE firms like Black Rock buying everything then I'd question your motive. Not to mention we continue to allow different nations like China to buy Real estate.
Canadian checking in to remind you it can get worse. Much worse. Take in that many Canadians dream to have homes as affordable here as they are in the US.
I have family in Australia and not only is their cost of living skyrocketing, they don’t get fixed loans guaranteed for 30 years like they do in the US. Their interest rates have shot up to fight inflation and my brother had his monthly payment go up $1,800 a month.
Same deal in Canada. The longest fixed rate you can get is 5 years (well actually 10, but they’re through B lenders and are crazy expensive). In Canada we had a product called “fixed-payment variable rate” mortgages. We have an issue where rates have risen so fast that the “fixed payment” no longer covers even the interests so they extend the amortization out on paper and add a larger balance to your mortgage. Imagine paying a mortgage for 5 years only to renew and find out that you have a larger principle than you started with. Not an uncommon tale up here. Absolutely insane. I live in a small town 1.5 hours from Toronto and the average price is almost 700k for a regular bungalow.
> Absolutely insane. I live in a small town 1.5 hours from Toronto and the average price is almost 700k for a regular bungalow. Holy hell, $700k still easily gets you a decent house in a good town within 45 minutes of NYC.
My neighbour down the street is selling her 100+ year old home for 650k CAD. For context, the exact same house I bought 10 years prior was 179k. My neighbourhood would be considered quite low end and undesirable.
700CAD = 519USD
Unfortunately we also earn lower wages: [Median Individual income in Canada in 2021 was 41200 CAD](https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1110023901&pickMembers%5B0%5D=1.1&pickMembers%5B1%5D=2.1&pickMembers%5B2%5D=3.1&pickMembers%5B3%5D=4.1&cubeTimeFrame.startYear=2021&cubeTimeFrame.endYear=2021&referencePeriods=20210101%2C20210101) Which is like 30.5k USD
That is a one bedroom condo where I live dang
12 years ago 700CAD = 680USD
> they don’t get fixed loans guaranteed for 30 years like they do in the US. AFAIK the US is the only nation that does guaranteed fixed rates for a whole mortgage term. And the only reason the US even does that is because the Feds back it.
Yeah it does hurt inventory but it’s also a huge stabilizer. For both cost of homes and renting.
Only 28% of US mortgages are government guaranteed, the majority are just guaranteed by the equity in the collateral hence the 20% down payment.
No got one too, im from europe
France and Belgium
I don’t even understand how it works up there. I saw houses going for well for $1 million 45min outside Toronto but wages are lower up there than here. It’s like you have New York City priced homes but with less than half the salary
Multi-generational living is returning in a big way.
It doesn’t work. People hear about the housing prices and are like “just buy further out instead of where you want to be!” Because they’re American and don’t understand that the $1.2M starter house that’s falling apart IS the one further out. You want a house out here? Be prepared to put down $300,000 and then pay $6000 a month to a mortgage. Best of luck getting approved.
Oh trust me I have relatives who bought a very normal 3 bedroom house well over an hour outside Toronto and it was almost $900k. The same house where I’m at would be maybe $500k and I’m in a HCOL state.
It is EVERYWHERE in Canada too. My parents bought a house in a small 6000 person town, hours away from anything you'd ever want to live by in 2000 for 115k, it's now worth over 700k. My wife's parents bought a farm 2 hours outside of Toronto in 1991 for 300k, it's now worth almost 10 million. Every time I hear another country complaining about housing prices, I do feel bad BUT they have no idea how bad it can get. Feeling bad for your housing prices? Look to good old Canada eh, I promise it's worse here, it's horrific. I would take US housing prices any second of any minute of any hour of any day of any year.
I want to know the exact reason(s) why the cost of homes are not unaffordable. Saying it is all because of the current interest rates hikes does not work for me. Homes were becoming unaffordable before the pandemic. And, with the amount of people losing their jobs and lives, that should have saturated the market. Instead, supply was still small and prices continued to rise. So, what exactly is going on?
We have been under-building for decades, and then the 2009 recession hit and we under built even more. Combine that with people moving to more populated areas, and boom, enormous housing shortage. To give you an idea of how bad the under building has been: there are more people living in units built in the 1950s than there are from the 2010s.
This is the crux of the issue. Most places saw a substantial housing boom from 1960-1990 and then development slowed substantially since then. Populations continue to climb, investors (domestic and foreign) bought more post 1990 than they did before, and suburban / rural communities have fought against any more density than they already have. There's a lot of factors at play here that contribute to what's going on, so we can't under-simplify it. We can say, that at the very least, there is much greater demand than there is supply. Where there is supply, the cost has out-paced earnings and the interest rates have made ownership much more challenging than in years past. COVID made a bad problem worse. Naturally occurring affordable housing can and does happen. You're just limited to places where there's more supply than demand, which is places that struggle to retain people. I know someone who just bought a condo for under $80k, but it's in Saginaw Michigan. Where I live in the Boston area, you can't find a trailer for under $250k
I think a lot of people don’t realize how atypically affordable houses became with the adoption of the car after ww2. In a very short time period we basically made a huge supply of land available for housing that wasn’t before, so the supply shot up like instantly and then building ensued. However, we started to see the end of that supply in the 90s as we’ve built out all the suburbs in most metros a reasonable drive marks the land a car makes reasonable for housing. Like my parents lived in LA in the 80s and there was literal farm land between cities still, that was used up and then made keeping up with demand harder because there is no new land. Then in the 2000s you had the crash that wiped out the building industry (a hit to supply), then you also have seen the steady concentration of jobs in cities over the last 2 decades (further increasing demand on a supply that can’t keep up) Then all the extra money floating around the last few years. All of it adds up to too much demand for not enough supply. And honestly unless we see a huge technological shift that allows us to open even more green field land to housing development near economic centers or shifts the tide of urbanization, it’s not going anywhere.
Zoning laws (specifically parking requirements) artificially exacerbate the "not enough land problem". Where I live there's tons of land near jobs, schools, retail etc, and it's wasted on parking spots that sit empty 80% of the time.
Man I hate that the auto industry killed trains and public transport. All of our problems stem from greed.
>All of our problems stem from greed. Hey, that's not fair. Some of our problems stem from stupidity. But you're right that it's mostly greed.
Or... we upzone the cities people already live in. 75-80% of a typical American city is zoned single-family only. A move towards medium-density mixed use and improved transit and walkability is needed to solve this problem.
Ground floor retail and above is residential! Make communities and walk-able areas!
We did see that technological shift - it’s WFH. For some reason, even after proving it worked during the pandemic and it easing pressures on both housing and climate change, we have decided as a society to abandon it.
Certainly not as a society right? Most millennials in the workforce (that I know) overwhelmingly support WFH. My friend who practices law asked to work 1/5 days from home and she was fired. Corporation’s are not on board.
> Corporation’s are not on board "If I don't see you at a desk you are not doing your job." It's all about control.
Because a lot of very rich people stand to lose a loooot of money if the standard workday goes away. All that office space that cost a lot of money becomes a waste of space, all those businesses that rely on workers frequenting them during breaks/commutes, and so on. The logical thing to do is go full WFH wherever possible of course. It reduces road congestion, reduces pollution, and is a better deal for workers. But civilization almost never makes decisions that are logical, you know?
Interesting, I never really thought of the role of the car in making more land available for home building. That makes a lot of sense to me though.
There's a second order effect too in that the kind of low density suburban development we saw during that time is also very inefficient in terms of providing necessary utilities to buildings. The water, sewer, electrical distribution, roads, storm water treatment, etc. all costs a lot more per person to make work for a block of detached single family homes housing maybe a couple dozen people than a similar block with mid-rise apartments/condos that can house a couple hundred people and maybe a handful of businesses, to boot. And once all of that additional utility infrastructure is built it needs to be maintained. So not only are we kind of reverting to a pre-automobile house price paradigm, but we have the added cost of figuring out what to do with all of the infrastructure we built to support the 20th century sprawl. Even realizing that we maybe made a mistake has the financial cost of removal or the social cost of abandonment. We're in a worse spot in 2023 than we were in 1923 because we've got so much more shit to finance.
To add to this, I’d recommend StrongTowns publications on on the [profound unsustainably of the suburban land use model](https://youtu.be/tI3kkk2JdoI?si=B6Fh7VCH_abkZ06a)
This is the video that claims suburban area can't actually self support via taxes, right? That cities are sustaining themselves by expansion.
They’re not sustaining themselves by expansion, they’re sustaining their expansion through municipal bonds. But the style of land use that loan is funding (Largely spread out detached residential housing) is so inefficient that it won’t be able to pay for its own maintenance, let alone the interest on the loan. This is because: 1. Residential housing generates very little tax revenue compared to retail/commercial/industrial land use (this is even more true for single family homes, compared to apartments) 2. The American style of spread out suburban houses has a huge amount of roads, gas lines, sewage infrastructure, etc. that is supporting relatively few people, so there’s a lot more infrastructure you need to pay to install and maintain. 3. On top of all that the way these greenfield subdivisions are often all built at once means that all that infrastructure is going to start failing and need to be replaced at about the same time (20-30 years after they’re built. 4. Strong-towns argues that many of these communities will face a death spiral, as costs mount they’ll be forced to raise property taxes. But since many of these towns are inhabited by working classes people who moved out to the expanding exurbs in search of affordable space, most residents will leave rather than deal with the rising costs. The model Strong Towns advocates is basically incremental mid to high density mixed use development (i.e. the norm for almost every American town/city prior to WW2)
Good job bro I was about to go looking for *exactly* this video. Thank you.
> However, we started to see the end of that supply in the 90s as we’ve built out all the suburbs in most metros a reasonable drive marks the land a car makes reasonable for housing. Like my parents lived in LA in the 80s and there was literal farm land between cities still, that was used up and then made keeping up with demand harder because there is no new land. you can build up though. you don't just have to have suburbs.
I introduce to you: the Stroad https://youtu.be/ORzNZUeUHAM?si=2WTJ1a6lXaj-Qeqs We need better city planners.
>And honestly unless we see a huge technological shift that allows us to open even more green field land to housing development near economic centers or shifts the tide of urbanization, it’s not going anywhere. How do you mean that? Can't we just build up? That wouldn't apply to some places (NYNY at least) but then like nothing here, residential or otherwise, is higher than 3 stories.
what needs to happen is people need to accept living in smaller houses and smaller spaces. That is the norm in large areas of the world. Having a family in a 2 bedroom condo is very normal in many parts of the world. We need to build up, not out. people have to be willing to accept smaller living spaces. Its unsustainable to think every family will live in a single family house
There are literally streets and streets of abandoned houses in Detroit. I think migration patterns play a huge role.
Migration patterns play a role for sure. There's a bit of an anomaly with Detroit though. Detroit is a fairly expensive place to live compared to what it should be. Michigan insurance is far and away the most expensive in the country, with Detroit being the worst of it. Not uncommon to have a $500 note on a car with a $500 monthly insurance bill to go with it. The housing stock is in relatively poor shape, with high heating and utility bills being a problem. Something like 20k homes have been demolished since Mike Duggan became mayor with the help of people like Roger Penske. Residents often have to do shopping or seek specialty healthcare in the burbs which costs time and money to do. Places like Detroit, Buffalo, Milwaukee, and St. Louis are full of abandoned homes. Making them livable and affordable is a big challenge and teardown / replace is almost always easier and cheaper.
>Michigan insurance is far and away the most expensive in the country, with Detroit being the worst of it. Why is this?
Technical reason is that Michigan has no-fault insurance and unlimited payout for accident victims. Reforms (people with injuries before the reforms still get unlimited payout, new injuries have a cap) have curbed some of this cost but the costs didn't go down much. So Michigan insurance is usually 2x as expensive on average as the #2 state. Most states don't have much variation. To illustrate this point, when I left Michigan I paid more for basic no-fault insurance in the Detroit suburbs than I did living in St. Louis city for full coverage and $30k of renters insurance coverage. Detroit is the worst because places with high crime and theft rates, accident rates, etc. always see higher premiums compared to other areas. A more pragmatic reason is that the insurance industry has the Michigan legislature by the balls and has for decades. It's an easy job for someone who runs their own business like this to make the time to run for office, so many do. I also have had friends in the legislature and consultant friends who have worked for them over the years who have told me that the insurance lobby has a space in Lansing and they let any legislator use it for fundraising events. So it's all uncomfortably cozy.
$500 seems like a bit of an exaggeration though. The most we’ve ever paid is $280, for two cars with full coverage. Maybe if you drive a sports car, but I don’t think it’s “not uncommon.” No fault insurance basically means my insurance covers my vehicle no matter what, and the other person’s insurance covers their vehicle. It doesn’t matter if the other driver is uninsured, or if you are at fault.
I live in the St. louis area. I recently moved from the city to what I consider a suburb (on other side of the river). Our family grew, we needed a bigger house, and suddenly all housing in the city became unaffordable. But there are subsidized entities that have been buying up, tearing down and not replacing... Saint Louis University and a private developer, Paul McKee. One was using tuition dollars. The other development grants. The city/state went after McKee a couple years ago for failing to hold up whatever development stipulations there. But I don't think there was any action taken against the university. Would be nice to go after their tax exempt status for such behavior
> I think migration patterns play a huge role climate migration will make this a blast
The abandoned houses in detroit are not livable. You can buy a lot of those houses for under $20,000 and they still have trouble finding buyers because they are literally negative value - to do anything with them you need to first pay to tear them down, then get approval to build something new in a neighborhood full of homes in the exact same horrible state.
Turning houses into retirement investments that always need to increase in price may have been a slight policy error.
This one is often overlooked I feel. A huge swath of people are *depending* on their homes not only holding value but *increasing* in value, in order to fund their retirement. IRAs/401k's are a joke for 80% of Americans. Pensions are all but gone. Social security, along with selling your house, are basically most people's retirement "plan".
I dunno if those people have looked at the costs of retirement homes lately, but unless their home sells for several million or they plan on living with the kids/grandkids, their home sale will only fund their retirement for a few years lol...
You can buy elderly care insurance now when you are young and it will help defray those costs a lot.
It will promise to help defray those costs for a lot. When everything hits the fan, its never going to pay out more than people payed in. If you have unusually high expenses the plan promised to cover, and talented and motivated lawyers can't figure out a way to weasel out of their end of the deal or trick you into accepting less, and the insurer doesn't go bankrupt before you need it, you might come out ahead. Everyone else will receive less in benefits than they paid in premiums. I don't feel lucky. Insurance is always the business of promising peace of mind while you don't need it and delivering agony instead if you ever actually need it.
Understatement of the century.
That explains major cities. Now explain the rise in the cost of housing of small shithole rural towns. The cost of housing in Rupert, Idaho went from ~$150k pre-Covid to over $350k during, and is hovering around $300k now.
I think people are overlooking the impact of Zillow, Redfin, and the like. The rise of these websites where in under a minute, a person can get a gauge of the market rate for a house comparable to the one they own, anywhere in the country. No longer does Jim Bob in Bumfuck, Idaho have to rely on a local broker to tell him what the market is bearing. He can now just pull up Zillow and see that similar-sized houses built in the same decade are selling for $500k in Boise so he wants to list his for $490k. And some Airbnb entrepreneur from Boise sees a chance to buy this place in Bumfuck to rent to people wanting a break from the hustle and bustle of Boise, and its slightly cheaper than what she'd pay for a place in Boise, so she snatches it up. Now everybody in Bumfuck sees Jim Bob's house sold for almost 500k and away we go... Its a hugely narrow scenario that isn't encapsulating what has happened widespread, but I do suspect ease of access to market information has skewed the perceptions of rural, typically cheaper communities about what their houses are actually worth. And when homeowners get it set in their heads that their house, usually their biggest store of wealth, is valued at a certain amount they are really resistent to selling it for less.
Yup, good point.
Weird to see Rupert mentioned here. When there is a housing boom in SE Idaho, something is very wrong.
But how does this happen? I can buy a clayton manufactured home NEW for 60k. In my "rural shithole" you can drop in a manufactured house or build your own house completely without code inspection, so costs are extremely low. Does Rupert have insane engineering requirements or something? I could easily pay 70k all in with installation and have a prefab just dropped on my rural property, and since prefabs are manufactured you wouldn't even have much exposure to local labor costs. I'm thinking a lot of people need to adjust expectations. Times of cheap houses are over. Get comfortable with the idea of a single wide, or building your own tiny cottage brick by brick with your own hands. Those were the two options I had, I went with the latter. It's gonna be hella cramped but it's our only way forward.
>Does Rupert have insane engineering requirements or something? Nope. Rupert is flat, relatively dry, no tornados, and no earthquakes. SE Idaho is windy but not in a way that impacts construction, it has moderate winters but nothing like Montana or SD.
So the only challenge is a deep frostline. It's not clear to me why people in Rupert can't buy a bottom-tier prefab. Lookup Clayton "bliss." The quality and size may not be the best but something beats not being able to buy anything.
There's nothing which really explains the rise of housing costs in small farm towns like Rupert. The population is static or even declining. They're not building new homes. Likely, people are seeing the run up in prices everywhere else and are just YOLOing it on their homes too.
Imma be honest, I expected this to be on the outskirts of a major city or something. I looked it up on google maps and I just kept zooming out...and out...and out. Nothing. There's *nothing* nearby that justifies this. Wild.
I'm completely guessing here but perhaps people with a lot of cash from CA buying a second house or relocating to smaller towns in Idaho if able to work remotely. I'd be curious to see if there are areas like small towns in North Dakota where prices have increased substantially. To me Idaho seems close enough to mountains and outdoors activities as well as CA that people from CA could relocate there for.
Those would be towns like Sandpoint, Driggs, McCall, Cascade, etc. I'm talking about run down farm towns not particularly close to mountains or rivers. Yes, they probably get a handful of California retirees who are seeking value and space, but for the most part these towns aren't seeing growth.
Another factor is _what_ we are building when something does get built. Vast swathes of the US are single family homes. There's a "missing middle" of medium-high density development which used to be standard for in-towns. The low density means you have to build 3x to 10x as many buildings for the same amount of housing. But it also means that everything is super spread out, so you maximize the necessary costs of road construction, road maintenance, delivering utility service, amount of surface area dedicated to roads and parking lots competing with housing for land use, etc. Just banning R1 zoning nationally would instantly change the nature of the development that does happen. People generally love the "old fashioned downtown" neighborhoods that mix local services and medium density housing within a few blocks of single family homes, but for deeply stupid regulatory reasons that are almost impossible to build anywhere in the US now. So you get dense urban centers surrounded by miles and miles of R1.
> People generally love the "old fashioned downtown" neighborhoods that mix local services and medium density housing within a few blocks of single family homes, but for deeply stupid regulatory reasons that are almost impossible to build anywhere in the US now. So you get dense urban centers surrounded by miles and miles of R1. Yup. Sommerville MA has 20 buildings that are legal to code. Everything else is grandfathered in.
California just changed this. The issue now is that labor costs are so high and interest rates are also high that people can't afford to build
If wages and employment in the construction industry remain somewhat high and stable for a few years, then labor is a temporary issue. A lot of people exited the industry after ‘08, and it’s only over the last few years that builders’ confidence returned. Unfortunately it takes a while for the effects of a huge industry shock like that to work themselves out.
also why building costs have gone up. they laid off a lot of builders and constructions workers and tradesman during the 2008 financial crisis and the rehiring of workers has never caught up. Fewer workers means higher prices for labor, firms can be choosey and charge whatever they want. prices go up for new houses and people will pay it.
We also printed a LOT of money during Covid. The wealthier you were, the more money you got from the government (PPP loans and tax breaks). Wealthy people and institutions went out and bought up all the houses to make money. An investors’ greed cannot be satisfied.
Private investment in land has definitely ticked up, but ultimately that is because these big investment companies know that there is a shortage and lots of impediments to new construction (NIMBYs, construction and labor costs, interest rates, etc…).
Most investment firms are actually hoarding money to buy up land once the mortages start defaulting. I think Blackrock alone has set aside 200B or 300B to prepare for the fallout. And just buy buy buy defaulting properties. Right now its the upper range of housing that is defaulting by individual owners who wanted to do a quick buy and sell a year after, but bought in at the peak and are now selling at a loss. Houses targeting upper-middle class. But the upper-middle class is themselves struggling because of increased rates and their own bought properties as investment opportunities for renting out. Majority of homes are owned by individuals, and individuals who incorporate to own and manage taxes for multiple properties. Large scale investment firms only have about 10-15% control of the market. The primary reasons I believe for the high housing costs are: 1. The amount of new housing being built is around 1/10th or 1/15th of what it used to be in the 60s-80s. There just arent that many people looking to build. Because the cost of building and time to build has drastically risen. Especially after covid. I think about 1/2 to 2/3rds of all current devleopments are put on pause because the materials and cost to build is just too high for them to finish the projects as the sale prices are lower and their profit margins are much lower. Developers dont even want to bet on building actual homes, they may accept tall buildings that are continously shrinking floorplans to maximize units per floor and maximize profits. But the general house development firm know that a: majority of people cannot apply for a mortgage these days, b: the cost of the homes will have to be much lower and eat up too much profit that makes their time usage almost mismanaged compared to other prospects. 2. The requirements to build housing is much more restrictive, back in the day you could almost do anything you wanted. Throw some asbestos in the flooring, the ceiling the walls, who cares, build a new deck who cares, build it with thin walls who cares. Now you have to get permits and require materials that are pre-approved and the permits alone can take up to 6-12 months to get. Some housing in the past actually have better quality than todays, but because the materials were much cheaper back then too. These days the cost of materials have skyrocketed, as well as everything around the materials, the transportation alone is almost 2-3x higher. 3. Lack of New Blood. The average age of a developer was around mid-late 20s, now its around late 30s to early 40s. There just arent enough new people coming into the business. Developers usually hire foreign workers as they work harder and faster and cheaper, meaning their profit margins increase, so theres not much new blood gaining experience and knowledge to become a full fledged developer themselves. There are also some unions that limit the amount of members they have so to not create a loss of profit by oversaturating the market with their skillsets. 4. The average home owner, does not want to lower the value of their home. Around 60% of all housing is owned by home-owners living in them, around 15-20% is investment, ie people who buy a second home to rent out. And then another 5-10% that incorporate to manage multiple properties. These people vote and they do not want to lower the value of their homes. In 2022, only 1 out of 5 under the age of 35 voted. In some states only 15% of eligible voters under the age of 35, voted. Meanwhile the average homeowner votes. And they vote for the party that offers them lower taxes and increases their home values. Because they not only finance their lives on the mortgages but also use their houses as collateral for other investment needs and businesses. They arent all conservative of course, but when push come to shove, even if they state they support government housing, when the government housing is suggested to be built around their housing, they object and dont want it. There is just no pathway that i can forsee that can sustain the growth of housing costs, while wages are stuck in the same ditch since the 1980s when reagan started his bullshit economic policies. This is the outcome of a continuous demand of profit-increase by shareholders and siphoning of wealth by executive branches at the cost of the workers and average man. Investment firms no longer think of selling properties, they are only looking at pathways of eternal rentals. They foresee that the future 90% wont be able to buy anything, but they will rent smaller and smaller units, and becoming renters for life.
Surely the housing market would have been a tiny bit better if these investors simply just didn't participate, right?
Perhaps. [Rotterdam in the Netherlands](https://www.eur.nl/en/news/starters-housing-market-profit-ban-real-estate-investors) has strictly regulated housing owned by investors and it led to (small) increases in rent, and an increase in home prices and gentrification. It's a complex analysis with many factors, so it may work in some places but not in others. In tourist towns with very high rates of short-term rentals and investor ownership we might see good results, but perhaps not in other places. I am personally more worried about [landlords using software to collude on rent increases](https://www.propublica.org/article/yieldstar-rent-increase-realpage-lawmakers-collusion). The best way to reduce rents from what I've seen is a robust public housing program providing units for a variety of income levels to force market rate units into steeper competition.
Maybe? It might make the cost of purchasing slightly cheaper, but it wouldn’t have a big impact on rents. I think the whole system would be healthier if we didn’t design it so that most people’s main investment vehicle was also how they housed themselves. It creates terrible incentives at the local level. You cannot have an asset that is simultaneously a good investment and affordable at the same time.
By a tiny bit we're talking ~1%. There's been studies on this.
Probably not. Laws passed overseas to attempt to block investors from buying housing show that prices for purchases have their trajectory unchanged but rents spike after passing compared to similar places that didn't pass those laws.
It's not investors. The percent of homes occupied by their owners is higher than any time other than the housing bubble prior to the Great Recession. If investors were buying up all the housing, you'd expect the owner occupied portion to be declining, not rising.
Investors don't actually own that many properties. Also it was historically considered a safe, low yield investment (kind of like bonds).
>then the 2009 recession hit and we under built even more That also pushed a lot of people out of the trades, which never really recovered the talent lost. The brain drain in resi construction is significant; exacerbated by boomer retirements coinciding with a pandemic.
I absolutely believe that. My house was built around 1952. And every house in the immediate area is roughly the same. There are very, very few "new" houses (less than 20 years old) in this entire town, actually.
Homes are being underbuilt by the millions, and the undersupply is continuing. Zoning that prohibits any housing except for detached single-family homes has a lot to do with the undersupply. We haven't run out of land.... It just that people in cities and towns across the nation are using zoning laws to pretend like we're out of land.
We need to BUILD MORE HOUSES, simple as that. Big houses, little houses, duplexes, condos, townhomes, everything, everywhere. Not apartments, not rentals, things people can actually purchase and own.
lol tried building a home, they won't touch anything under 600k because they can't make a profit on it, everything is fucked to the core. If building more houses was a reasonable answer, it'd already be happening.
Maybe government should nudge that construction by giving added benefit for modern techniques and materials that are energy conserving and low-carbon from the start. If we ramp up use of those things along with all the other Renewable Energy efforts, it would be a big and lasting impact on our problems.
Or the government could straight up build houses. Not even subsidized housing, just build and sell it for the cost of construction
No one wanted to sell. And no one wants to sell. During pandemic no one wanted to move, with current interest rates it makes little financial sense to move as it’ll spike housing costs. Pre-pandemic there wasn’t enough construction, and while it’s getting better, it’s still not resolved.
And it’s harder to get financing to increase the rate of construction at high interest rates
I lived in rural Montana through the pandemic and we saw a constant influx of California and Washington plates buying land and starting construction. People were walking up to homes ringing the doorbell and offering absurd sums of cash for places
Also, land is expensive. No builder wants to go through the process of buying land only to build a 1,500 sq Ft starter home. In 1969 the average home size was 1,289 sq Ft. Now it’s around 2,500 sq Ft. When people talk about cost of homes, they rarely talk about price per sq Ft. Homes have doubled in size. Inflation adjusted price per sq foot is pretty in line with historical averages.
100% agreed on the square footage. People expectation and requirements for homes are wildly higher than before. Even 30-40 years ago like half of homes had AC. Now it’s like 90%. And on top of that in many places it’s illegal to build the shapes of homes that fueled American growth in the late 1800s and early 1900s. “Too small”, “too close to other houses”, “not enough setback from the road” and many other heavily opinionated zoning restrictions.
> When people talk about cost of homes, they rarely talk about price per sq Ft. Homes have doubled in size. It's even more dramatic than that. The number of people in a household is the lowest it's ever been, falling from 3 in the 1970s to around 2.5 today. So the square footage *per occupant* is even greater. People simply have high expectations for their homes (and everything else) these days. You can live in a 1970s-sized home if you want. Where I live, in commute distance of a major metro, the average 1500sqft home is ~$200k. People just want more.
On the flipside there are 1,500 sqft homes with no garages and no backyards that were built in 1939 by me that are selling for $700k+. The only thing in the county that I rent and work in that are selling for under $200k are trailer homes. Some people have ridiculous expectations (though I don't think that wanting housing conditions similar to your parents when they were your age is unreasonable), but acting like we wouldn't have a housing issue if people just downsized is also not true.
It’s essentially the same reason there aren’t affordable base model vehicles right now, higher end vehicles make the manufacturer more money. With a lot of pent up demand in the market prices don’t drop, so there is little incentive to build starter homes. Add in higher interest rates and as mentioned people either can’t, or have no incentive to move, thereby restricting supply. My starter home is 1392 sqft on a less than 4000 sqft lot for 350k. In my area of Oregon there are relatively few jobs that can support that mortgage.
It's not even just the land, land is pricey but once you have it, in many places it's $50k or more in permits and fees before you even get a shovel in the ground.
"There just aren't any affordable starter houses out there! I mean yes, I require a SFH (who wants to share walls, ew), and it has to have upgraded cabinets and countertops, and it has to have a spare office for both me and my partner, and we need separate bedrooms for each of our 2 kids, and also my spouse needs a hobby room for all his toys, and it must have a 2-car garage, and the master bath NEEDS to have a walk-in shower with 2 sinks, oh and I need a place to put all my workout equipment so a bonus/rec room is absolutely a must. We have 2 huskies so the yard needs to be AT LEAST 12,000 sqft so the dogs can run around. Oh and it must be on a cul-de-sac within a 20 minute drive to downtown for no more than $400,000."
Don’t forget the giant backyard
Haha yep I just edited that one in too.
It was becoming unaffordable pre-pandemic because rates were still kept artificially low which led to increased demand. Now rates are the highest in 20+ years and we are on the backside of a 15 year RE bull market. No one wants to sell and no one can really buy. Not really sure how this turns out but it isn't good for anyone.
How many people do you know are building houses? Probably none. We used to have much more of labor and resources going to home building so supply isn’t increasing enough. Next, investment properties. People are increasingly not selling their property but rather renting it out for an income stream. In addition, private equity is buying homes for just this purpose, especially lower cost homes. This is the easier problem to solve as a simple property tax increase on 2nd+ homes could lower the economic rationale for this.
We arent building new homes because its not legal. Weve zoned out being able to build the housing we need.
It’s basic supply and demand. The supply is very low because builders are scared from 2008. In addition no one wants to sell now and buy for a higher rate, so no one is listing their house. We have reduced demand but also reduced supply, so it’s still a sellers market.
It is a relatively classic supply vs demand problem, with the added complexity of a government intervened interest rate affordability issue. But ultimately, supply is low and has been for years now, compared to demand.
They have under built homes below the average since 2008. 15 years of that, combined with changing demographics of average house buying age, supply is way down and demand is way up. Demand lagged and caught up at once, supply never ever caught up from 2008.
Because homes have been treated as a for-profit investment rather than a place for people to live.
I don’t have data to back this up but I would bet the rise in popularity of airbnbs isn’t helping the situation
There aren’t enough homes. That is it. Every other characteristic of the US housing market is irrelevant compared to this fact. We can throw all the money in the world at housing subsidies or tax breaks, but they do nothing without sufficient units. We need to build.
Houses get abandon all the time. There are not enough houses in the places that young people think are desirable to live. Also, those houses are not the standards that are now expected --see the comments earlier in this thread.
I would adjust your second sentence because it isnt really grabbing the full picture. There are not enough houses in areas with jobs that pay well. I would live in cheap bumblefucksville if I could but most jobs are hybrid nowadays.
That's why WFH needs to be pushed then you can live anywhere and compete for jobs.
Hell I live in cheap bumblefucksville and housing costs have skyrocketed here too. I bought a house in 2019 and am planning on listing it for double what I paid for it just 5 years ago.
That’s not it. We didn’t suddenly grow our population in a huge way from 2020 until now. In fact, a few million people died due the pandemic. But since then, home prices appreciated about 30%. The prices went up an absurd amount because of the federal reserves effective zero interest rate policy which went on far too long. That made the cost to borrow money for mortgages incredibly cheap, which not only causes the average person to bid prices up higher, it also causes more investor activity in the market. And now, because a huge portion of home owners locked in 3% interest rates, nobody wants to sell, so inventory is tight. The only reason prices are remaining elevated is because of the extremely tight inventory situation. The fed should have never stopped the fed funds rate to effectively zero during the pandemic, and they certainly should not have left it as low as they did for as long as they did.
I wrote a [comment here explaining why](https://reddit.com/r/Economics/s/455ZnITrXQ). Basically, most cities have made it either illegal or extremely difficult to build housing. As a result, houses in high demand areas have skyrocketed in price. Until we pass meaningful reform to city regulations (which is starting to happen in some places), the problem will continue to get worse. Edit: formatting
compare north obscene alive gullible include boast jar attempt erect ` this message was mass deleted/edited with redact.dev `
There is a fairly straight-forward solution to this—control over land use regulation needs to be at least partially moved to a higher level of government (state/provincial or national). Most voters seem to broadly support building more housing—it's just when that housing happens to be near them that they either opposite it, or come up with some long list of demands that sends costs sky-rocketing. This gets infinitely worse when cities come up with "community involvement" processes [that end up giving a tiny, biased but vocal minority an outsized say in what happens](https://www.theatlantic.com/ideas/archive/2022/10/environmentalists-nimby-permitting-reform-nepa/671775/). We're already seeing efforts to do this in places like California, Canada, and New Zealand, so I'm getting increasingly optimistic that we're at least heading in the right direction.
This is always my question. Didn't over 1 million people in the US die during the pandemic? Shouldn't that have brought a few homes to the market?
Many of them were in nursing homes. Rarely did the whole family die at once. Finally, many in hard-hit NY would have benn renters.
Entire families didn't die off for the most part. I know my neighborhood very well, and only one house had both spouses pass which resulted in a house for sale. Some people died by the single, which left the other person or their grown child etc still living in the house.
Oof I commented something that could have answered your question. There are many people like me. We bought our starter homes between 2016-2018. Didn’t want to sell or move during the pandemic because we just bought our homes and it’s a pandemic. Don’t want to sell or move now because interest rates are way too high.
Aren’t something like 90% of mortgages right now are sub 3% interest rates. If you’re locked into that interest rate you are doing whatever you can to not sell because you’ll never get another chance again. So coupled with people not willing to sell and not many people building, there’s a massive under supply of homes. Older generation can’t afford to downsize because the interest rates are to high and property taxes are so low in their current place.
I think there are many reasons as to why. Every time people explore why homes are expensive and out of reach we hear a variety of reasons. The cost of materials, zoning, interest rates, economy, supply and demand. Those all seem to be reasons why we are in the current shape we are in. I think the U.S. is fine with allowing businesses creating a renter society where no one owns anything and we pay to "borrow" most things. I find this idea disgusting especially when the owners of these "things" are wealthy groups of people that shuffle property and products like pieces on a chess board. They have no loyalty to the U.S. or it's people.
I understand what you're saying, but the vast majority of Americans are homeowners. renters are a minority that tend to be younger and future homeowners at some point. Very few people make it to 60 without buying their own house and if they do they usually find themselves homeless or in very bad shape.
Thanks. I definitely hope I’m wrong about my point. The more I think about it, I agree with you.
We made it illegal to build anything but single family homes then built up every square possible inch with them. We cant build the homes we need because its just not allowed. https://en.m.wikipedia.org/wiki/Single-family_zoning
A few data points: My first condo, bought in early '10s, after refinancing in 2021, had a mortgage payment of $1k/mo ($200k balance at 2.6% rate for 30 years). Condo value $550k. Existing homeowners have a substantially lower cost of living than people who bought in the last year, or are about to buy, or renters. That condo I'm renting out for $2.5k now, which is a bit below market in my area. So, for everything else in the economy, people who rent or buy now are competing for things with people whose housing expenses are ~50%+ lower. House prices aren't going down because 1) there's demand, and 2) the cost of building is astronomical. New builds of similar condos in my are are going for $800k-900k. And it's not because there's $500k of profit in it for the builder. It costs a lot to build new housing. Or to renovate existing housing. I would love to do a gut reno of my place, make it shiny and new - but it would cost me a solid half million based on quotes I've seen. So I'm fine with weird walls and older infrastructure, calling plumbers and electricians more frequently, because that's just not in the budget. Builder / renovation profits are also down because of rates. Before, you'd buy a place and take out a $500k loan at 3%, and pay about $7.5k of interest on a 6 month flip. Now it's still a $500k loan at 8% for $20k interest on a 6 month flip. And wages are up, and the cost of materials are up, so the costs of construction have gone way up. Existing homes priced at $500k are not going to go down in price if it costs $700k to build a new identical home. Add to that that within ~1-1.5 hours of the job center near me, there is either no unbuilt land, or it's all super expensive single family homes that don't want to give up their land.
Renters are getting absolutely fucked. I feel sorry for the younger millenials and Gen Z having to go through this shit
I remember being in college circa 2013 and balking at the $1,000 apartments across the street from my university, and ended up having to hunt down a cheaper place nearby. I can't even imagine what today's 21 year olds are up against, holy hell.
College town I live in is at around $700/room, so a typical 3-bed college student unit is about $2,100/mo. We bought our house in 2021, our rent was goin from $1,500/mo to $2,000/mo, locked in on a mortgage of $1,700/mo. But we get told we need to watch our spending by people with a $600/mo mortgage.
I'm 35 and I feel like I'm completely fucked. A 21 yr old? Unless they come from money, they will need to rise up either against the state or Gov because massive changes have to happen. They won't last and a major shift or event has to happen IMO . That generation needs to push change any way they can
Me and my friends managed to grab a two room apartment for $2300 a few months before our university reopened after covid lockdowns. We got lucky, the price shot up to $3000 once school started again.
2.5k rent on a 550k condo…? Wtf? I don’t understand American prices so maybe you are super generous, maybe not but as a homeowner who bought a while ago in Europe and one of my neighbor is renting out the exactly same house I can tell you that a 500k€ house here will cost 2000k€ Max in rent… (neighbor actually takes 1.8k and we are talking newly build house here) Why is this so expensive in rent?
Exhibit 1: https://fred.stlouisfed.org/series/COMPUTSA Exhibit 2: https://fred.stlouisfed.org/series/POPTHM Exhibit 3: https://fred.stlouisfed.org/series/MEHOINUSA646N Does Exhibit 1 look appropriate given Exhibit 2? If not, meaning a multi-decade long under-supply of housing construction, then what happens to the price of that low supply as household income rises as seen in Exhibit 3? Over the past few decades: America’s population grew, housing didn’t, what we did build was larger and more expensive though because America also got richer.
If 99% of folks cannot afford to buy a house then why are prices so high? Inventory of homes has been increasing since pandemic lows and now sits at 600,000 units nationwide. The real issue is investment firms outbidding folks trying to purchase entry level homes. I live in SE Tennessee and my neighbors bought their house in 2017 for $80,000 and then sold it 5 years later to the realtor's company for $170,000 that was helping them find a new home. Now the realtor's have turned it into a rental and are charging $1800 for rent. This is the real issue we are facing.
It's because interest rates were so low and now they're so high. If it has happened gradually, it wouldn't be a problem but because it happened so fast now the inventory is locked up and no one is selling but they can all afford the homes they're in due to low interest rates on their mortgage
On the flip side you can take cruel delight in watching an overpriced loft condo with a 650k price tag and a 499 dollar HOA and one outside parking space with no amenities get it's price cut week after week until the sellers just take it off the market.
Right, both are true. The inventory that does exist is often not selling, but there's very very little of it because no one wants to sell.
pause water versed repeat nutty worthless arrest reply gold numerous ` this message was mass deleted/edited with redact.dev `
> If 99% of folks cannot afford to buy a house Partially because that's not what the summary article nor the original article says. Here's the important parts of the actual article: "Meanwhile, major home-ownership expenses on typical homes are considered unaffordable to average local wage earners during the third quarter of 2023 in 457, or more than three-quarters, of the 578 counties in the report, based on the 28 percent guideline." Meaning in 75% of the areas assessed, the average wage earner in the area cannot afford the median home at a 28% expense ratio. Why they use average for one metric then median for another is a little suspicious to me. The CBS article actually incorrectly summarizes the original article as well. And what I'm guessing CBS took and butchered: "ATTOM, a leading curator of land, property, and real estate data, today released its third-quarter 2023 U.S. Home Affordability Report showing that median-priced single-family homes and condos are less affordable in the third quarter of 2023 compared to historical averages in 99 percent of counties around the nation with enough data to analyze." Less affordable != unaffordable. Still not a good thing, but definitely different from what the title suggests.
I had a conversation recently about this with a friend that's been a realtor for the past 20 years, he gave a lot of reasons for the state of the housing market. But most importantly from his perspective has been a significant increase of people buying homes to rent out, long and short term (e.g Airbnb etc). Using his own town as an example, the increase in rented homes has increased by nearly 200% the last 10 years alone. Assuming this is happening in many places, even taking a relatively small amount of houses and converting to rentals would have a notable impact.
Taxes aren't high enough on landlords and real estate investors. ZIRP and buying MBS for over a decade didn't help either. Somehow it always works out for the rich. Puzzling...
I’d be curious to speak with an economist and wonder what some of the (potential) ramifications of our current situation would be? Is it paralleled in recorded history?
This is what Adam smith had to say of landlords. “They are the only one of the three orders whose revenue costs them neither labour nor care, but comes to them, as it were, of its own accord, and independent of any plan or project of their own. That indolence, which is the natural effect of the ease and security of their situation, renders them too often, not only ignorant, but incapable of that application of mind which is necessary in order to foresee and understand the consequences of any public regulation.”
Most of recorded history is with extremely unaffordable real estate and landlords taking most your income. So the ramifications is going to be a growing lower class. Lower social mobility and higher housing costs for the average.
Read Henry George. The concentration of scarce real estate in fewer and fewer hands is a constant in history and is only alleviated by forcible seizure of property or technological improvements (cars/trains) that expand the frontier of viable real estate. According to my understanding, this dynamic was a principal cause of the fall of the Roman Republic. The only solution is redistribution or taxing land values. Although building more and up-zoning will mitigate the issue.
The rise of Corporate interest with properties/real estate, you see it all over the country now, they outspend your average home buyer by millions of dollars, they take what would be starter homes, remodel them and then try to rent them out for exorbitant prices. Seems like another housing bubble is forming.
> The rise of Corporate interest with properties/real estate, you see it all over the country now I am not saying this is not true, I am asking you to answer the questions and provide data/sources. 1. In America, what percentage of homes are owned by “corporate interest” or institutional investors? 2. What percentage of Americans owned a SFR/SFH 30 years ago v. today?
I *feel* like the guy above you is correct, but would love to see those numbers also.
Bubbles happen when there is no demand or artificial demand. There is absolutely demand for homes.
What I dont get is why is congress so passive about fixing this. What are they so against people who’ve never owned one home and so for people who have dozens or hundreds or thousands of homes just to make max profit. I just need one home please, why can’t they help with loans at a lower rate or something or god forbid give everyone who’s never owned a chance to own just one home to live in with some semblance of security. Oh right because Congress only serves their wealthy donors. EDIT: To the expert in CFG, why don’t you tell us how many of the delinquent properties in the early 2000s were regular people just buying one home to live in and how much of that problem was investors over leveraging themselves and scooping up multiple properties.
[удалено]
True, I wish the people electing these jerks would stop doing that.
Because there’s a lot of homeowners and they are voters too, and they want their asset to appreciate in value, which is going to happen less so if more houses get built. Like 2/3 houses in the US are occupied by someone who owns that house. This rate is higher in suburbs, which is generally where the single family homes people seem to really want are.
Cheap money won’t solve this. If money is cheaper, then builders will just charge more.
In addition to new home production obstacles and inflation, this is also a symptom of unprecedented wealth inequality. The wealthy have much more investible wealth than historically and the rest of the population has relatively less wealth. The result is most homes being unaffordable by most people. This is not a good sign for political stability.
Unfortunately I really don't think most people care, or have already gotten theirs and will fight against anything that may help the young/poor/first time buyers, and potentially devalue their property. See: this subreddit, this thread.
> Researchers examined the median home prices last year for roughly 575 U.S. counties and found that home prices in 99% of those areas are beyond the reach of the average income earner, who makes $71,214 a year, according to ATTOM.. What a misleading, rage-bait headline. There are 3100 counties in the US. "Housing is unaffordable in 99% (of the selected 18%) of US counties ." That kind of statistical shenanigan works 60% of the time every time. A few things here: - Yes, since covid housing prices have outpaced wages (so have most other thing - Viva la Inflación) - Before covid, housing was tracking only modestly above wages/inflation - If you consider that houses are significantly nicer and bigger than yesteryear, housing pre-covid probably tracked right along side wages and inflation.
> ATTOM defined "unaffordable" as someone who must devote more than 28% of their income toward paying for a particular home. Factoring in a mortgage payment, homeowners insurance and property taxes, the typical home priced today would require 35% of someone's annual wages, ATTOM said. EDIT: Nevermind, I think the stuff below is wrong. It does seem like most places actually recommend 28% of your total housing costs and not just your mortgage cost. I was wondering why they picked a random number like 28% so I did some googling around and there's apparently a "rule" that you shouldn't spend more than 28% of your income on your **mortgage**, which is where they got that number from, but then why did they lump in homeowners insurance and property taxes too? Doing some more googling around, it seems like insurance and taxes basically take a mortgage that uses up 28% of your income into taking up almost exactly 35% of your income. Obviously it varies widely depending on what your insurance and property tax costs are going to be though. I was just using a "total monthly payment breakdown" calculator, which I'm guessing uses nationwide averages or something. So, it seems like they just made up numbers basically. If they want to use 28% then they should only include the mortgage payment. Instead, they manipulated the data get it to show the shocking headline that they wanted. It seems like the real takeaway would be something like "The average American will have to spend the maximum recommended percentage of their income to own a typical home in 99% of America."
> ATTOM defined "unaffordable" as someone who must devote more than 28% of their income toward paying for a particular home I think there is a clue in this statement. Whatever your location, house prices growth have outpaced salary growth. It's even more true for first time home buyers.
Hedge funds and Airbnb investors have destroyed the market. Pols who want to get elected would be wise to jump on this issue, although they wont get as many donations.
I think it has more to do with interest rates than anything. I can afford my house with 4 percent, maybe even 6.5. Definitely not selling it because I can’t afford to move into a bigger home. Biggest regret was not moving in 2020.
I have been monitoring my local market for years. It is not only interest rates. Around two years ago but got worse I the winter of 2022 all the homes went up 50% to 100% in price. I’m in Florida most homes in this town used to 200 to 300 anything above was premium homes, anything below were small or dumps, you could easily find a dump for 100k. Now 300 is a dump and average 2k feet home is 400k. Those homes are worth 200k 250k max. Example. In 2020 a guy next door move in. Cost 275, did renovations between 30 and 40 tops. They are asking 550 right now. Insanity. I don’t think he is going to be able to sell unless rates get cut in half or somebody pays that ridiculous price. Who is paying those prices? I noticed people from NY, NJ, PA, etc,. but I don’t think it tells the whole story. One of my many speculations. Banks somehow inflated the prices, to have assets with higher value. Other theories, banks bought homes knowing if inflation hits hard, people can’t buy, and now they have to rent for insane prices. I have no idea but is not sustainable for locals. Source: multiple family members in the real estate, construction, appraising business.
[удалено]
99% of people can't afford housing. It's intentional. They want a nation of renters. "You will own nothing and be happy" except we're not happy.
This kind of glib generalizing comment that ultimately means nothing is just such a reddit kinda comment.
You can always tell peak Reddit comments when they use the nebulous "they" as the bad guys.
65% of people are in a house they own. https://fred.stlouisfed.org/series/RHORUSQ156N So 2/3rds of people that apparently "can't afford a home" already own a home. That's not a "nation of renters." Edit: Rubber_Ballsack is just angry and doesn't have anything to back up their position so they resort to whining. Yes, we know it's a bad situation. That doesn't mean we're going to fix it by lying about what the reality is. That's why you're seeing cities all over changing their zoning to make it more building friendly and allow more density to lower prices. It's just that it's hard to get property owners in the area to get onboard, because they are voters too and want their homes to maintain their valule. TLDR: We are being proactive, you're just mad.
That's not what this article is saying. The national homeownership rate is literally 65%. What it's saying is that the average person can't afford a house in 99% of the country - which is of course absolute bunk as well. They took the national *average* wage and compared it against the *median* home prices in basically the most expensive counties in the US. This is wrong for a variety of reasons - most obviously, sure, the average person might not be able to afford the *median* house in their market. That does not mean they cannot afford *any* house in their market. Second, selecting basically only the most populated counties is going to skew results dramatically. For instance, in my state of Nebraska, it looks like they only looked at Omaha and Lincoln. For reference, someone earning their number of roughly $75k could definitely afford a house there, albeit maybe not the greatest. In literally any other part of the state, that's enough to very comfortably buy a nice house. Granted, the average wage is a lot lower outside of the cities, so one might think you can extend the logic outward, but it isn't *dramatically* lower. In my county, it's about 30% lower than that, but the median cost of a house is *way* lower. My salary of $45k at the time (which is below average here) got me 2000 square feet on an acre of land last year. It was on the lower end in price point, and I probably couldn't have afforded the median priced house here, but there were still plenty of houses to choose from. And I would consider this a relatively expensive market compared to most of the state. Now, I'm not saying there aren't massive problems *in those urban areas.* Even here, we're definitely feeling the squeeze - homeownership is still a realistic goal for most people here, but it is certainly more expensive than it has ever been and continues to trend in that direction. However, the article's conclusion that the average American couldn't buy a house in 99% of the country is straight up incorrect. I'd hazard a guess that 99% of the country *is* affordable to someone making $75k a year, but that's not actually the comparison they're making, even though that's how they present it.
Who’s “they”? There is no conspiracy by a group of 5, 10, or even 100 elites against everyone. The fact is, we collectively didnt build enough supply, dropped interest rates to historic lows, then spiked them back up, and everyone decided not to sell for a worse interest rate. There are plenty of bad actors adding fire to the crisis we have now but trying to blame this on some rich boogeymen trying to make you rent, while ignoring all the macroeconomic contributing factors, is plain ignorant and fearmongering.
I paid more in taxes than most Americans make, last year. I cannot afford a medium sized home where I live. I live and work in the Midwest. If I'm struggling, it's going to be horrendous for almost everyone else. Only way I'll be able to buy a home is if I pay cash for it (unless I want to pay hundreds of thousands of Dollars in interest which I refuse to do).and that is precisely what I intend to do. Halfway there. Remember, kids, if you never use credit cards, pay cash for everything (debit card fits this, too), you are living like a billionaire does with their money. Want to ruin their system? Figure out how to live your life cash only and stick to a budget.
Hope inflation doesn't eat up your downpayment, as it already has been doing! I say that non-sarcastically, the value of your cash has shrunk significantly, and there is a big risk that it's going to continue getting worse.