There’s no place like home within our price range
The Future. According to Insider, home prices are going up, and they’re already so high that sales are declining faster than they have in fifteen years. The problem’s not demand–which has far outpaced supply–but that most Americans simply can’t afford to buy a house. Various factors make it unlikely that homes will get cheaper anytime soon, and as long as people don’t buy them, more homes won’t get built–unless policymakers step in.
Mortgage rates in the U.S. have risen above 7% for the first time since 2001. That’s a big deal, but it’s not the source of the housing affordability crisis so much as a symptom. The root cause? Too few homes.
- The problem dates back to 2007 when builders built way too many homes, and supply outpaced demand, so much so that the result was a housing bubble (and, ultimately, the 2008 financial crisis).
- In response, builders have underbuilt ever since. But once demand started to outpace supply during the pandemic, builders couldn’t keep up due to soaring labor costs and supply chain snags.
- They still can’t. Add inflation to the mix, and prohibitive construction costs are likely to keep builders from lowering the asking price for homes or building more of them as long as so many remain unoccupied.
The National Association of Home Builders claims that U.S. builders would need to build 1 million new homes to bring prices back down to normal.
Short on solutions
Pressuring lenders to lower mortgage rates is unlikely to work, as it does nothing to alleviate the gap between supply and demand nor encourage builders to do so.
There are no controlling global supply chain issues. But the government could prioritize the mending and maintaining specific material supply chains the U.S. has with other nations or subsidize building costs to incentivize construction and enable firms to offer higher wages to the workers they badly need. Regulators could also do away with zoning laws and policies that increase building costs.