What it will take to make homes affordable again for millions of Americans

[WarGamer]

THIS is part of why people are down on the economy.

https://www.cnbc.com/2023/10/25/will-americans-ever-be-able-to-afford-to-buy-a-home-again.html

As mortgage rates reached a 23-year high last week, the cry went off across markets and social media: Is housing affordability dead? Has a version of the American dream — home ownership, kids, backyard barbecues — died with it?

The question is sharp because housing affordability has dropped by nearly half since the ultra-low interest rate days of 2021, according to the National Association of Realtors.

The median family was already $9,000 short in August of the income needed to buy the median existing home, the association says, and the recent surge in rates since has moved another five million U.S. families below the qualification standard for a $400,000 loan, according to John Burns Real Estate Consulting. At 3% mortgage rates, 50 million households could get a loan that size. Now it’s 22 million.

https://fortune.com/2023/10/18/how-bad-housing-market-affordability-redfin-115000-salary/

The housing market is so unaffordable that buyers need to make nearly $115K to afford the average home, Redfin says—that’s $40k more than average earnings

[everyonematters]

1. The government needs to get more involved in the production of housing.

Thus bringing down the cost through decreasing demand. Rent controls don't work.

[WarGamer]

2. agree... 100%

I know SOME will criticize me... but they need to encourage tiny home communities AND incentivize large bloc-style residential buildings.

I'm NOT talking free housing... talking affordable housing.

[Think. Again.]

3. Removing....

...the 'price-based' realtor incentives would help too.

It isn't any more work for realtor to draw-up pre-formatted contracts for a $10,000 than a 10,000,000 house, yet the people who set the prices on each home are the same people who will profit by getting a percentage of the higher prices.

[TheRealNorth]

4. I think the institutional investors are the problem

And it all started with the great recession. They buy up homes (with cash on hand) and as long as the rents remain high, they can promise good returns to their investors. In my area, they are renting out modestly-sized homes in a newly built subdivision, probably because they decided building and renting was more profitable then either selling directly or buying and renting already-existing housing.

[haele]

5. Greedspan's pushing the idea of flipping and family home equity started it.

Before the 1990's, a home was a necessity; you bought one of you could pay a little more than the average local rent so you wouldn't have to keep paying rent about the time you wanted to start thinking of saving more for retirement and emergencies, and could start helping your kids to better themselves and navigate adulthood if needed. It was protection for a surviving spouse, and wealth you could pass down to your kids.

The idea of a house or apartment as an investment was something landlords had. Not families and individuals. Interest rates were high, but housing costs were stable with inflation for the most part. A house estimated as worth $15k in 1955 could sell for $22k for a 15 year 11% mortgage in 1975 - that's the situation for the house my parents bought from their landlord next door. She lived in our house, the "Mother in law" Craftsman her parents built in the 1910's after she got married until she inherited their house in the early 1950's. She couldn't sell it for the assessed price in 1955 because of a housing glut, so she rented it out as extra income until she passed and her son sold it to us.

1995; I bought a nice 3 bedroom ranch style house on a half acre for around $90k/20 years at 6.9% interest with the VA. In early 2002, when I had to sell (a couple layoffs and medical issues pre-ACA) it's "value" had jumped up to $160k with the interest rate around 2.4%. I took a capital gains hit, but we need the $60k it netted after the everything was settled.
People were beating down the door to buy it and flip it. Three months later, it sold again for $200k. 4 years later, it sold for around $400k. In 2011, it sold in a foreclosure sale for $150k. Too bad my credit was still a bit f***ed from the near medical bankruptcy in 2001, or I would have bought it back.
But we finally got back up to where I was in 1999 about 5 years ago - too late in life, unfortunately, to really benefit from owning instead of renting.

Haele

[JohnSJ]

6. Restricting house purchases to U.S. citizens or residents