Surveys show that as many as 92% of Americans have cut back on spending due to rising prices. Record-low housing affordability is setting off a vicious cycle.
Surveys show that as many as 92% of Americans have cut back on spending due to rising prices. Record-low housing affordability is setting off a vicious cycle.
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"Record low affordability" is a really weird way of saying price gouging.
Part of the problem is that housing in the US is treated as a commodity and used for investment. Purchasing a house isn't just so you have someplace to live, but rather it's treated as an investment that must appreciate in value over its lifetime. This is in stark contrast to every other major living expense. You don't purchase a car and expect to be able to sell it for more than you paid for it a decade later, but somehow that's the expectation with housing.
In a traditional market prices would rise and fall to match supply and demand, but because housing is treated as an investment, there's a strong pressure to never let the prices fall. If someone can't make a profit selling their house they'll rent it out instead or even let it sit empty until such a time as they think they can make a profit selling it, which means the only way to reliably bring the prices of housing down in the US is to build new housing, and even then the effects of that are limited and highly localized. Outside of that the only time houses come down is in catastrophic events like the sub-prime mortgage fiasco.
Is just building more houses enough? I live in a brand new house in a brand new neighborhood. I bought right before COVID and since then my house has gone up 60k in value. I'm watching the builder raise their prices for the same floor plan by 60k to match.
I guess if you overbuild then maybe there's pressure for it to go down? But right now I'm seeing new build prices match inflation of the housing market even though building cost inflation aren't matching home valuation inflation.
It's a complicated problem. The builder wants to make as much profit as possible, so they're going to build what they think they can sell at the current market rate. If high end housing isn't selling and a bunch of mansions are all for sale with nobody buying they're not going to build more mansions, instead they'll shoot for lower cost housing that there's demand for. However that's still going to leave a bunch of people unable to afford a house if there are still other people in the market able to afford more expensive houses. This then gets even more complicated by people who don't actually need a house, but are instead purchasing houses as investments who then end up buying many of those new houses and artificially inflating the demand and therefore the prices.
At some point though, demand will be entirely met, at the high end and builders will be forced to move down market to keep selling property. Municipalities can help address some of this by zoning and requiring a decent mix of low, mid, and high income housing to be built, but once again "investors" and even worse investment companies can screw this up by snapping up the low income housing and converting it into rentals, or simply sitting on it for some period of time.
As with most problems that haven't been solved yet, there's no easy solution (because if it was easy to solve, it would be already).
Who the fuck thinks it's sustainable to keep raising the price of housing indefinitely? If people's salaries aren't also going up indefinitely, who will be able to afford to buy it?
Shhhh... It's only price gouging if it's gas stations during a weather crisis. All other companies doing it during (and after) a pandemic is called capitalism, and it's unamerican to not like that.