With a Historically Low Buyer Pool, Why Are Home Prices Still on the Rise?

Home Prices On The Rise

Why Are Home Prices Still on the Rise and What Can Be Done to Make Housing More Affordable?

You’ve probably noticed home prices are still on the rise right, even though we’ve been experiencing the lowest demand for housing in decades, so then why the heck are home prices still going up across the country?  The answer is simple, supply and demand.  Even though demand is at an all-time low, so is supply, keeping values stable or on a slight up-tick. 

So, then why the heck is the supply so low, well we have to look back at the last six decades for the answer and that answer is new construction.  Every decade since 1950, home builders have built on average 25M new homes per decade except from 2010-2019 were only a mere 6M homes were built, that’s about a 75% drop from previous decades.  And why does past new construction effect todays inventory, well they are only new homes one time right? After that, those homes, if being sold again are part of the re-sale market and the inventory we know and need and they simply aren’t there.  

So why aren’t the builders building more homes and more importantly building more affordable homes? Well the answer is two fold, first, the federal government really needs to ease up on their virtuous attacks mostly revolving around the climate change agenda on industries like natural gas, lumber, steel and now even appliances which is skyrocketing the cost to build. Second, if you want builders to build more affordable housing the federal government needs to be incentivizing builders with things like tax credits as well as removing the restrictive barriers to build like crippling zoning regulations, land use restrictions, and permitting challenges. They also need to introduce things like Federal Affordable Housing Programs along with federal down payment assistance programs to make the dream of home ownership more affordable and once again a reality for buyers. Until the bureaucrats in Washington can get out of their own way, I don’t see home prices coming down anytime soon.  

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