Now there is a lot of money tied up in homes and real estate plus homes have become an even more important marker of wealth. As the article asked, will the transfer of wealth in these homes simply reproduce existing disparities in housing? Or, might there be ways that the increased value of housing help promote access and opportunities for others?
The median price of a single-family home topped $1 million in most areas of Hawaii during the coronavirus pandemic and has declined only modestly since. The state has the fourth-highest per capita rate of homelessness in the nation after California, Vermont and Oregon. On Thursday, new data showed the islands experienced net population loss five of the last six years. In 2022, U.S. census data showed more Native Hawaiians live outside Hawaii than within.
Some of the action taken thus far:
In one of his first moves after taking office in January, Democratic Gov. Josh Green created a new housing czar to oversee the effort. One thing Chief Housing Officer Nani Medeiros is focused on is identifying roadblocks and redundant permitting at local and state levels that can hold up construction. The administration also wants to pour $1 billion into housing programs, including $450 million to subsidize the construction of affordable dwellings.
Lawmakers have sponsored bills to trim bureaucracy, fund public housing renovations and encourage construction of dense housing on state land next to Honolulu’s planned rail line…
Some moves to shore up affordable housing by easing development regulations are being met with trepidation by conservationists, who warn that going too far in that direction could endanger the islands’ world-famous ecosystems and farmland…
Currently, housing construction is not keeping up with demand. Only 1,000 to 2,000 new housing units are being built in Hawaii each year. Those numbers are dwarfed by the 50,000 new units a 2019 state-commissioned study estimated would be needed by 2025.
This sounds similar to addressing affordable housing in numerous United States locations: high prices, limited land, long wait times to approve projects and carry out construction, and concerns about expanding development. It sounds like there are concerns particular to Hawaii as well.
In the bigger picture, the United States would benefit from states, metropolitan regions, and/or cities that can solve some of these affordable housing issues. What is the best path forward, particularly in balancing the interests of property owners, those who want to preserve green space and habitats, and the needs for more cheaper housing? A successful blueprint, or even several, could go a long way.
Only in the Midwest region are close to 50% of the homes sold at $250,000 or under. The Northeast is roughly at 33%, the South is roughly at 26%, and the West is roughly at 6%.
So does this mean there are more starter homes in the Midwest? Not necessarily. Perhaps this is linked to incomes in the region and less household wealth for people to spend on homes. Perhaps the housing stock of the homes is older and the homes need more rehab. Perhaps there is less demand for the homes due to slower population growth.
Still, the differences are stark. Could Midwestern states and communities advertise that they have cheaper housing? (Of course, an influx of residents could push housing prices up as has happened in certain locations throughout the United States.)
But housing wealth is significantly up since the beginning of COVID-19:
“The housing market has shed some of its value, but most homeowners will still reap big rewards from the pandemic housing boom. The total value of U.S. homes remains roughly $13 trillion higher than it was in February 2020, the month before the coronavirus was declared a pandemic,” said Redfin Economics Research Lead Chen Zhao in the report.
“Unfortunately, a lot of people were left behind. Many Americans couldn’t afford to buy homes even when mortgage rates hit rock bottom in 2021, which means they missed out on a significant wealth building opportunity,” Zhao added.
Hence, I am a little confused by the story that leads with the recent data. The recent drop is just a portion of the big gain from February 2020 on. People do feel losses strongly but the bigger picture is that homeowners have gained much in recent years.
Indeed, a Realtor.com report found that while starter homes — which it defines as all two-bedroom listings — seem unaffected by the current correction in the housing market, luxury homes have been feeling the full effects…
The price trajectory for luxury homes — which Realtor.com defines as the most expensive 10% of homes in any given market — however, went the opposite way.
Their prices “skyrocketed as the stock market surged and buyers sought more living space” during the pandemic: in the middle of 2021, there was a 40% year-over-year price increase for luxury homes but by the end of the year, the luxury market receded as recession fears increased. And in 2022, luxury homes have seen modest-to-stagnant price growth, around 2.5%, ending the year close to flat…
“If you think of luxury home purchases as discretionary, starter home purchases are almost the opposite,” Hale said in the report. “It’s more about timing and strategy.”
Home prices fell for the first time in 3 years last month – and it was the biggest decline since 2011
This quickly relays information about recent trends – prices went down for the first time in a while – as well as longer patterns – biggest drop in over a decade.
Next are some figures on housing affordability:
Now, housing affordability is at its lowest level in 30 years. It requires 32.7% of the median household income to purchase the average home using a 20% down payment on a 30-year mortgage, according to Black Knight. That is about 13 percentage points more than it did entering the pandemic and significantly more than both the years before and after the Great Recession. The 25-year average is 23.5%.
The housing affordability statistic is put into terms accessible to a broad audience: nearly 33% of the median household income is needed to buy the average house with common mortgage terms. Additionally, this percentage is higher than recent years and a longer 25 year stretch.
Some housing markets are seeing bigger price declines than others:
Some local markets are seeing even steeper declines over the last few months. San Jose, California, saw the largest, with home prices now down 10% in recent months, followed by Seattle (-7.7%), San Francisco (-7.4%), San Diego (-5.6%), Los Angeles (-4.3%) and Denver (-4.2%).
It could be noted that these are expensive and hot real estate markets. Yes, they had larger drops but they had been pushed higher in recent years than many other markets.
And the article ends with information on mortgage rates:
The average rate on the popular 30-year fixed mortgage began this year right around 3%, according to Mortgage News Daily. It climbed slowly month to month, pulling back slightly in May but then shot more dramatically to just over 6% in June. It is now hovering around 5.75%.
This highlights the rise in mortgage rates this year. Some broader context might be helpful; what was the average rate before COVID-19 or over the last 10 years?
This article provides numerous statistics and often puts the figures in context. Yet, it does lead one lingering question: what is the state of housing prices overall? One answer might be change after a period of trends during COVID-19. Another might be to focus on different actors involved: how does this affect the housing industry or what about the difficulty of some to get into the housing market or it could be a story about higher housing values for many homeowners.
Statistics are not just facts thrown into a void; they require interpretation and are often applied to particular concerns or issues.
The Kinder Institute and Harvard University’s Joint Center for Housing Studies released Tuesday morning their annual reports on the state of housing in the Houston area and the nation. Together, they painted a picture of a deepening divide between the prospects of current homeowners, whose equity has been buoyed by record-breaking home price appreciation, and renters, who have seen the monthly costs of buying a home rise far more quickly than wages.
The median-priced home in the suburbs of Clear Lake and Jersey Village, for example, were priced between $162,000 and $175,000 in 2011, according to the Houston Association of Realtors. They now go for $300,000 to $317,000.
“You have to go farther and farther out until you find a home that’s affordable,” explained Stephen Sherman, a researcher at the Kinder Institute. “The whole saying is drive until you qualify. We’re finding that people will have to drive even more” — a development which will have rippling implications on traffic and the way floodwaters drain…
“Suburban Houston — and new homes in suburban Houston — used to be extremely affordable,” said Lawrence Dean, the Houston regional director for Zonda, which does market research related to new home construction. Since then, the costs of land, materials and labor have all shot up. These days, it’s near impossible to build a home for less than $200,000, he explained.
This gets at three long-standing questions about suburban life:
How far will people be willing to drive from the big city or other population centers in order to get a cheaper, bigger home? In some metro areas, this extends past 40 miles and multiple ring highways. If more people can work from home, more suburbanites might be willing to be further out.
Even as suburbanites protect and celebrate rising housing prices, this also limits what others can purchase. Suburbanites have a long history of moving in and pulling up the gates behind them. But, even as suburban homeowners watch their personal wealth grow, others will not necessarily get the same opportunities.
Is the primary plan for affordable housing in American metro regions to just keep the sprawl going? At some point, this may not be possible due to conditions – see the price jumps in construction cited above – or changing ideologies about where to live.
It would be interesting to compare this to other metropolitan areas across regions and price points.
Homes ranging in price from $100,000 to $250,000, the typical cost for an entry-level home, have seen nearly a 28% decrease in inventory from a year ago, says the National Association of Realtors.
And smaller homes are also in short supply. In 1999, 37% of newly-built single-family homes were smaller than 1,800 square feet. By 2020, that share had fallen to 25%, Dietz said.
In comparison, in 1999, 66% of newly-built single-family homes were smaller than 2,400 square feet while in 2020, that share had fallen to 57%.
These are two very important factors for getting into purchasing a home. A lower price means a smaller down payment and mortgage is needed. Smaller homes are cheaper because they have fewer square feet and cost less to construct.
And without this ability to enter the housing market, it will take potential homebuyers longer to enter, if they can enter at all. This precludes them from building housing equity and stepping up to larger or more expensive residences in the future. It limits the ability of people to pursue homeownership, a goal many Americans have.
Tackling both price and housing size will be difficult in many markets where developers, builders, and those in the real estate industry can get more. Yet, here is an opportunity to appeal to an important sector of potential homeowners if solutions can be put into practice.
House prices were up less than 1% last quarter from a year earlier in Westchester, New York, for example — and not much more than that in Montgomery County, Maryland, a favorite of wealthy commuters to the capital.
The trend isn’t limited to the east coast, with Chicago’s Cook County posting an increase of 2%. By comparison, almost two-thirds of the counties surveyed saw prices rise more than 10%…
“Demand today tends to be stronger at the entry and mid-priced tiers of the market than at the higher end,” said Rick Sharga, Attom’s executive vice president of market intelligence. “Price appreciation tends to rise more quickly in counties with a higher percentage of lower-priced homes available.”…
In more than three-quarters of the 586 counties analyzed by Attom, housing was less affordable than in the past relative to incomes.
Interpreting this report about the data and trends, it sounds like housing prices increased faster than incomes in many places but not all places. Additionally, housing did not appreciate at the same rate; places with more cheaper housing appreciated more.
There is an idea that people who need cheaper housing can move to places or markets with cheaper housing. What if enough people move to those cheaper housing areas so that there is no longer cheaper housing? I’m thinking of the rapid housing value increases in Austin. In the first place, not everyone can simply move to take advantage of that cheaper housing, but, even if they did, this would defeat the purposes of moving as housing prices would increase.
Whether it’s Boise, Idaho, or Reno, Nevada, or Portland, Oregon, or Austin, Texas, the American housing market is caught in a vicious cycle of broken expectations that operates like a food chain: The sharks flee New York and Los Angeles and gobble up the housing in Austin and Portland, whose priced-out homebuyers swim to the cheaper feeding grounds of places like Spokane. The cycle brings bitterness and “Don’t Move Here” bumper stickers — and in Spokane it has been supercharged during the pandemic and companies’ shift to remote work.
No matter how many times it happens, no matter how many cities and states try to blunt it with recommendations to build more housing and provide subsidies for those who can’t afford the new stuff, no matter how many zoning battles are fought or homeless camps lamented, no next city, as of yet, seems better prepared than the last one was…
All of this happened fairly recently. In the years after the Great Recession, when homebuilders were in bankruptcy or hibernation, migration to the Spokane area plunged. That pattern shifted in 2014 when, as if a switch had been flipped, waves of migrants started arriving as already high-cost cities like Seattle and San Francisco saw their housing markets go into a tech-fueled frenzy…
Five years ago, a little over half the homes in the Spokane area sold for less than $200,000, and about 70% of its employed population could afford to buy a home, according to a recent report commissioned by the Spokane Association of Realtors. Now fewer than 5% of homes — a few dozen a month — sell for less than $200,000, and less than 15% of the area’s employed population can afford a home. A recent survey by Redfin, the real estate brokerage, showed that homebuyers moving to Spokane in 2021 had a budget 23% higher than what locals had…
Last year, Woodward declared a housing emergency, and her administration has put in place initiatives that mirror those of housing-troubled cities on the West Coast. The city has built new shelters, is encouraging developers to repurpose commercial buildings into apartments, is making it easier for residents to build backyard units, and is rezoning the city to allow duplexes and other multiunit buildings in single-family neighborhoods.
The primary focus here is on housing and the increase in prices. From what is described above, a good number of long-time residents now struggle to find decent housing. This is indeed a problem to consider.
I would guess there are other changes as well: increased business activity, more traffic, newcomers operating in local civic organizations and institutions. Many of these changes are assumed to be good in most communities: growth means status, activity, and increased tax revenues. Sure, there are some externalities – sprawl and what comes with it, changes to how things have been – but these are often viewed as growing pains. Growth is good.
The implication in this story is that this could happen to any community: people from the outside discover an undiscovered location and their moves drive up housing costs. Yet, I wonder how true this is. Will people in overheated housing markets really go anywhere or only to certain locations? Spokane is within a particular region plus has its own features and its own history. Would people from the coasts end up in Youngstown, Ohio or Fargo, North Dakota, Jackson, Mississippi, or Detroit, Michigan where there is plenty of cheaper housing and distinct local character? The housing game may not just be an endless one where those with resources are always searching out the next cheaper market; there are limits to where people go and invest their resources.
Targeted incentive programs – described here – might help with this issue as communities seek out particular kinds of residents they would like. If those programs turned into floods of people, how many would really want to turn that down?