Home Affordability Crisis: A National Problem With A Local Solution

Home Affordability Crisis: A National Problem With A Local Solution

I discovered a tweet by Kevin Erdmann highlighting a positive development in the US housing market, which immediately caught my interest. Those familiar with the Tallahassee Real Estate Blog will recognize this name.

Kevin Erdmann, a senior affiliated scholar at the Mercatus Center at George Mason University, is currently involved in two book projects with Mercatus focusing on housing finance, land use restrictions, and monetary policy.

I regularly follow Erdmann's insightful analysis of the US housing market and highly recommend his work to those seeking a comprehensive understanding of the subject.

The tweet displayed on the right shares positive news regarding the US housing market, which has been scarce in recent years. It highlights the record-high construction of multi-family units, which, once completed, could potentially alleviate the housing supply shortage responsible for skyrocketing prices and rents.

After carefully considering this tweet for several weeks, I felt compelled to delve deeper into the data for a more thorough analysis. Today's post presents three alternative perspectives on Erdmann's tweet, revealing a less optimistic outlook for the US real estate market.

Can Builders Save The Housing Market?
Home Affordability Crisis: Local Solutions ~ National Issue: Delving deep into current US homebuilder production. Enough? Short? A less optimistic real estate market outlook.
The Unaffordable Housing Paradox: Why Homes Are Out of Reach
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Are Home Prices Heading for a Crash?
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The Fallacy of Affordable Housing: The Need for More Homes
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Foreclosure Crisis: What the Data Tells Us
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Are you a NIMBY or a YIMBY?
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How Often Do Home Prices Fall?
Are home prices falling? Will house prices fall soon? Home prices are soaring, buyers are having to pay above most sellers' asking prices, and the housing market feels just like a feeding frenzy during Shark Week on the Discovery Channel.
Home Affordability Falls To 40-Year Low!
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The Surprising Way Interest Rates Move The Market
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Real Story Behind Home Prices: Fact Versus Fiction
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Biden Rent Control Plan
The White House announced an executive action that Biden says is designed to "protect renters and promote rental affordability," but I cannot imagine a worse response from our Commander In Chief to confront the nation's housing and rental affordability crisis
Big Redfin Report: First Time Redfin Saw THIS Since 2012!
Recent housing market data from Redfin, the large online real estate portal, shows that something occurred over the past two months that has not happened in the past ten years.
Will Assumable Mortgages Save Housing?
Will assumable mortgages save housing? Home affordability is becoming one of the hottest topics in the economy, but I was recently asked if assumable mortgages might bring some relief to homebuyers. This video shares what I think about how mortgage assumption will impact housing.
Why Vacancy Rates Are the Hidden Indicator of Housing Market Health
Imagine shopping for a new home—whether you're aiming to buy or rent—and finding that every other house on the block is empty. Conversely, imagine a tight market where you can't even find a rental property, let alone purchase a home.
Renter Nation Says Goodbye To The American Dream!
It's the beginning of a generational shift in the housing market that will greatly reduce homeownership and push the US towards becoming a renter nation, one in which Wall Street is in control of both home prices and rents
The Truth About Foreclosures - Mortgage Pipeline Update
The best way to start to analyze the potential for mass foreclosures is to break down the current mortgage pipeline to observe forming trends.
Will NINJA Loans Bring Down The Housing Market?
Housing Crash Coming? If you remember back to the housing bubble, we saw the growth of "NINJA" loans, as they were a segment of the home sales explosion.
Google Knows. The Surprising Real Estate Market Forecast You Won't Believe!
Is it possible to forecast home sales in the US housing market with a search on Google? I had this thought about Google and a google housing market forecast as I was reexamining our search engine optimization efforts.
Economic Outlook For The Housing Market
Joe Manausa gives an update on the economic outlook for Tallahassee and the US housing market. Includes housing market forecast, housing market activity, and new construction analysis, and reveals how Tallahassee compares with the overall US housing market.
Will New Construction Bottleneck Cause A New Housing Bubble?
Are you concerned that the bottleneck of builder homes under construction will cause a new housing bubble as they are finally completed?
6 Housing Market Rumors Debunked (1 Confirmed)
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Who To Blame For Soaring Home Prices
There is a huge shortage of homes in the US, and there is only one culprit to blame, and I’m going to tell you who it is!
What You Don't Know About Home Prices!
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Is The Supply Of Homes For Sale Finally Rising?
Is The Supply Of Homes For Sale Finally Rising? Is the US housing market heading for a crash? Will home prices fall? Follow the metrics that clearly show what to expect from home prices and the supply of homes for sale in 2022 and beyond.
Zillow Exposes Mainstream Media On Home Prices
Zillow serves up the data that exposes the poor reporting of the mainstream media on Zillow home prices and that conditions are not what they seem.
House Prices - Inflation Adjusted Home Prices
Just How High Are Today's House Prices? The price of houses in the US has risen to a toxic level, and many are wondering how they will be able to afford to live in their local communities
Podcast: Housing Myths Dispelled
Home Building Hero David Belman and Joe Manausa discuss many of the "myths" that have been published in the media about the housing market.
USA Today Misleads Readers About Home Prices
USA Today Misleads Readers About Home Prices - Median Home Price: The USA Today Network has been misleading readers, using the median home price change suggesting that houses are getting cheaper and a real estate crash is upon us. Is this poor journalism or is there something more to it?
Are We Overbuilding Again?
I've been asked recently for my opinion on the number of homes being built in the US. Specifically, people are wondering if the ghost of 2006 has come back to bring more homes to the market than what can be consumed?
Housing - Do You Follow Your Gut (Or Analytics) In Housing?
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Home Ownership Is Radically Different For Millennials
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When Will Home Prices Fall?
Are Home Values About To Crash AGAIN? Now that we've seen about three years' worth of skyrocketing home prices, prudent buyers with memories are asking when home prices are going to start falling again.

A Closer Look At Kevin's Graph

Let's start our deeper dive by enlarging Erdmann's graph.

New Privately-Owned 5-Unit Housing Units Under Construction And Completed

The graph depicts construction activity for new privately-owned housing units in buildings with 5 units or more since the 1960s. The red line represents the total number of completed units, while the blue line represents the total number of units currently under construction.

Erdmann's optimism stems from a compelling reason—the demand for additional housing units is significant, and we are currently witnessing a 60-year high in the number of units being constructed. The logic behind this observation is straightforward and logical. However, I couldn't resist the urge to delve deeper into the matter.

All New Privately-Owned Housing Units

Erdmann's graph illustrates the construction activity within a specific housing market segment. Given the prevailing concerns of affordability and supply, it is unsurprising to witness a growth in activity within the multi-family segment, which typically yields housing units at a lower per-unit cost.

However, when we broaden our perspective to encompass the entire market, the question arises: to what extent does this segment contribute?

New Privately-Owned Housing Units Under Construction And Completed

Upon examining this graph, a couple of observations immediately stood out. Firstly, the gap between the number of units under construction (blue line) and the number of completed units (red line) appears relatively narrow, indicating that the significant disparity observed in the previous graph may have a smaller impact than anticipated.

Secondly, the overall number of units under construction, encompassing all unit types, is also experiencing a 60+ year high, but I still felt there was more to learn from this.

Gaining insights from this graph demands exceptional analytical skills and a keen sense for data interpretation, so I wanted more clarity.

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Long-Term Average US Home Construction Trends

I have extracted the data from above and presented it in the form of one-year and ten-year trends, replacing the actual data with average values for these respective periods. This approach clears the graph of complexities and facilitates a more accessible analysis.

1 and 10-year trends for US Home Construction

In this graph, the blue lines represent a one-year trend, displaying the monthly average over a period of twelve months. Conversely, the red lines indicate a ten-year trend, illustrating the monthly average across 120 months. The dashed lines track the units under construction, while the solid lines indicate the number of completed units.

Among the numerous visuals I've examined, none captures the essence of the question, "Why are home prices and rents soaring?" quite like the depiction of the solid red line. It reveals a significant decline in completed housing units, reaching record-low levels, despite a slow but continuous growth in the US population.

Between 1970 and 2007, US homebuilders completed 1.55 million housing units on average each year for a span of 38 years. However, in the subsequent 16 years, that figure dropped by 34% to 1.02 million units annually. In short, we have witnessed a shortage of 534,000 housing units over the past 16 years, resulting in an estimated deficit of 8.54 million homes.

The reason behind the unavailability of affordable homes is clear: the rate at which we construct housing units fails to match the pace of population growth in the US.

Home Affordability: A National Problem With A Local Solution

The evidence presented in this analysis raises concerns about affordable housing in the United States. Despite Erdmann's positive news of increased construction in the multi-family segment, a deeper examination reveals a narrower gap between completed and under-construction units. Moreover, the long-term trends indicate a significant decline in completed housing units over the years, exacerbating the shortage of homes.

To address this issue and ensure affordable housing for all, it is crucial for individuals to get involved with their local politicians and make their voices heard. Attend meetings where the Nimby's fight against developers and voice your concerns that we are not building enough homes. We can influence change in our communities by advocating for policies prioritizing responsible development and affordable housing and urging lawmakers to act.

Let us engage locally and emphasize the importance of affordable housing in our neighborhoods. Together, we can work towards creating a more equitable housing market that meets the needs of everyone.

There are a lot of people who endorse Joe for the job of selling your home, from Barbara Corcoran (Star of ABC's Shark Tank) to Preston Scott (host of Tallahassee's top daily "Audio Magazine," as well as the thousands of happy customers Joe has helped in the past. Listen why!

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