Posted on 08/30/2024 9:30:33 AM PDT by SeekAndFind
Housing affordability in the United States has taken a sharp turn for the worse in recent years, as house prices surged to historical highs during and after the pandemic and mortgage rates have risen steeply over the past three years, as the Fed tried to rein in inflation.
It all began with a surge in demand for houses during the Covid-19 pandemic, when many Americans, flush with cash from government stimulus checks, reevaluated their living situation and sought more space amid stay-at-home orders and the sudden possibility of remote work. Further fueling demand were the historically low mortgage rates after the Fed had slashed interest rates to near zero at the onset of the pandemic.
At the same time, supply of new and existing homes was very constrained, as construction was disrupted by Covid restrictions and would-be sellers refrained from putting their house on the market during this uncertain time. This imbalance caused a rapid increase in home prices across the country, pushing many potential buyers out of the market, a trend that was exacerbated when the Fed started to tighten its policy stance in March 2022 in its efforts to cool inflation.
As Statista's Felix Richter shows in the chart below, according to data compiled by the National Association of Realtors, buying an average home is now out of reach for the majority of Americans, as the annual household income needed to afford a median-priced home without too much financial strain has shot up 60 percent since January 2022.
You will find more infographics at Statista
Back then, the minimum income to buy a mid-range house – around $380,000 at the time – was $74,000, roughly in line with the national median income.
Since then a massive affordability gap has opened up, as a required income of $120,000 stands opposite a median income of around $84,000 – more than 40 percent shy of what would be needed.
They don’t build starter homes anymore. Various codes and regulations have made starter homes unprofitable to build and the cities and counties like it that way. McMansions increase the tax base so they can hire more useless employees for city hall and the courthouse.
A starter home today is a run down pre-WWII shack in a bad neighborhood.
Let’s go Democrats!
Add in the NIMBYs who hate new neighbors and love the asset value benefits of a limited supply and this is exactly the problem. There is too large a coalition benefiting from the current situation for any abrupt changes to occur.
It is useful, however to look at the Hartman Comparison Index, developed by real estate investor Jason Hartman. It consistently shows that when housing is priced in terms of commodities - i.e., "How many ounces of gold does it take to buy a house?" - housing prices have not risen much at all since the 1970's. What has happened is that the value of the dollar has dropped substantially - and salaries have not kept up with this inflation.
This is simply what happens in a nation in decline.
I remember (back a million years ago) when a newly wed couple were first looking to buy a modest house.
Because of high interest rates and more importantly the very high down payment required, we were “locked out” of the housing market.
We waited a few years until terms had changed.
So you can still buy a house for 380,000. Why does it take so much more now to afford one, other than rise in mortgage rates?
Vanguard and blackrock. Making more renters and a serf society.
I hear that, but have you looked at prices lately?
Bought my first 3+2 in a very, very middle class LA suburb in 1997. I was 28 years old, married, combined income about $6k/month. House was $168k with a pool. Payment was about $1,300/mo w/taxes, home and mortgage insurance. With sacrifice & focused effort, it took about a year to save up $20k for down pymt, costs of purchase, & a small reserve.
That same house is now listed at $1,100,000. Even if I ponied up the down pymt, none of my 3 kids [in their 20’s and college degreed] could afford to keep it.
Finish your education, work hard, play by the rules.
No longer produces an American success story.
It depends on where you live.
Gonna need a little updating but $380k $380khttps://www.zillow.com/homedetails/267-S-Ridgecrest-Ave-Rutherfordton-NC-28139/102236674_zpid/
“ It all began with a surge in demand for houses during the Covid-19 pandemic, when many Americans, flush with cash from government stimulus checks…”
I never understood this. Were $2k in checks going to make the difference between buying a home and not?
Or did everyone else get a lot more than I did?
Possibly not because Alfred E. Newsom of California has a bill awaiting his signature giving $150k to illegal aliens in that state to buy homes.
Next leftist step: Stop price gouging on real estate.
You’ll take a loss on your house and you’ll LIKE IT!!!
You can get a decent home for 200K in many parts of the country.
Cheap money has consequences.
One of those consequences is inflationary pricing on real estate.
We can’t afford food, much less a House.
I never understood this. Were $2k in checks going to make the difference between buying a home and not?
Or did everyone else get a lot more than I did?
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The argument doesn’t hold any water because stimulus payments weren’t big enough on their own to set the current inflation rate. However, they kept our supply chains from completely evaporating during covid hysteria.
Past market intervention to stop asset deflation, Cheap money, plus sanction stupidity due to the Russian/Ukraine war, have done more to promote inflation than covid stimulus checks & PPP loans that no longer exist.
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