During the early proceedings of the Republican National Convention, an iconic shot of construction workers assembling a new home was projected on giant video screens on either side of the stage.
It’s an image that carries with it many positive emotions: family, community, good jobs, and the pursuit of the American Dream.
It briefly suggested that housing might be a major theme of the rally. Mentioned Former President Donald Trump and Vice presidential candidate Sen. J.D. Vance (R-Ohio) lamented the current tough environment for young people wanting to buy a home.
The negative comments are justified. According to Redfin economists:“A perfect storm of inflation, rising prices, high mortgage rates and a housing supply shortage is making 2023 the least affordable year for housing in recent memory.”
And so far, 2024 doesn’t look much better either.
In fairness, the global pandemic has sent shock waves through every industry and caused significant disruptions to supply chains. The ripple effects of this once-in-a-lifetime disaster are still being felt today. COVID-19 has caused a revaluation of residential real estate and has led to dramatic changes in the way we work.
But as we emerge from that crisis, the hurdles facing potential homebuyers continue to grow, making it more difficult to close the racial homeownership gap. Slight improvement Low interest rates in the pandemic era.
Recent report According to the Joint Center for Housing Studies at Harvard University, “price increases have caused the median sales price to rise to nearly five times the median household income.” In May 2021, the median price of an existing home was $283,000; three years later, it reached a record high of $419,300.
But it’s getting worse. The same report, citing March 2024 data, showed that “median monthly mortgage principal and interest payments on home purchase loan applications” have risen “by more than $852 over the past three years.” Factoring in property taxes and insurance, Reports The big jump in payments has made “the total monthly cost of a median-priced home in the U.S. now is the highest it has been since this data was first collected more than 30 years ago,” according to the report.
The National Association of Home Builders recently announced incentives for home buyers. investigation The median price buyers expect to pay is shown to be about $307,000.The Census Bureau said the survey found that only 20 percent of respondents expected to pay more than $500,000, but 37 percent of homes are priced at $500,000 or more.
The National Association of Home Builders concluded that at the low end of a price range, the percentage of prospective and recent buyers exceeds the number of homes being built in that price range, while at the high end, the number of homes being built exceeds the percentage of buyers in the market in that price range.
A large part of the mismatch between supply and demand is the cost of building new homes: Builders know there is a market for new homes under $150,000, but they can’t build homes at such low costs.
A major obstacle is outdated and sometimes misguided regulation. study The organization’s research arm concluded that regulations account for $93,870 of the cost of the average new single-family home. Issues include expensive impact fees, inefficient land use policies, cumbersome permitting procedures and unnecessarily restrictive building codes.
The costs of the restrictions will be passed on to potential first-time homebuyers, who are already hamstrung by a lack of housing inventory.
The current shortage of affordable housing is exacerbated by a limited inventory of existing homes, many of which are current homeowners with mortgage rates below 5 percent who are unwilling or unable to relocate to a new home.according to According to the New York Times, this “lock-in effect” is “paralyzing homes that might want to leave, on a scale not seen in decades.”
Redfin Data 78.7% of existing homeowners have mortgage rates below 5%, 59.4% have rates below 4%, and 22.6% have rates below 3% in 2023. Many of these borrowers, regardless of age, are beginning to think about the possibility of residing in their retirement home.
According to data from the National Association of Realtors, existing home sales in 2023 Lowest in 30 yearsIn June they Slowest annual pace since October 2010It’s even lower than it was in May 2020, at the height of the global pandemic.”
The strong desire of millions of people to become homeowners is apparent to candidates for office everywhere, and we need thoughtful, serious efforts from both sides of Congress to make the American dream of homeownership a reality.
Achieving a steady supply of affordable housing has always required collaboration among a broad range of actors, including the private, public, and nonprofit sectors. Housing is unique in that the private sector provides market access to underserved communities and facilitates government lending programs. Perhaps we should think of them as partners, not as targets to regulate.
At the federal, state and local levels, we need to get serious about finding solutions that will put homeownership back into reach for millions of first-time buyers. We need to work together now more than ever to revive the American dream of homeownership in 2025 and beyond.
Brian Montgomery is a former Deputy Secretary of Housing and Urban Development. He Twice He served as Federal Housing Secretary under three presidents: George W. Bush, Barack Obama and Donald Trump.
