Addressing America’s Housing Crisis: The Impact of Supply and Demand on Home Affordability

So I’m sitting here waiting to pick up some pizza for the day, and I had some people message me about my previous post about this $400 that, you know, a month that Biden wants to give and do I think that’s actually gonna happen and get past, it’s not, it’s just a campaign ploy. But here’s how that negatively impacts our housing market. See, the problem we have right now is that we have too many people that wanna buy homes and we don’t have enough houses for them to buy. So when you have a low supply of something in a bunch of demand, it jacks up the cost. Okay? And I know that interest rates get a lot of blame for what’s going on and making homes unaffordable, but the average price of a home in America’s doubled over the last five years. Like it’s home prices that have made things unaffordable. So by dumping more money into the economy and making, and bringing basically more buyers to the table, it doesn’t solve our inventory issue. The only way to solve our inventory issue is either to build more houses, okay? Or incentivize boomers. Investors, you know, all these people that have these homes at 2% interest rates to give up that mortgage and make a move. We have so many people like, you know, I, and I don’t know if it’s something with taxes where it becomes, you get a tax penalty for owning more than one primary residence or more than one single family home. But we has, we have all these people who became, you know, landlords and they now own all these rental homes or we had, this is probably a bigger scenario right here, is that what would happen is if somebody bought their first home and they got it at 2%, and then they bought that next home and they’re like, shoot, I’m not giving up this 2% interest rate. I’m gonna turn it into a rental or I’m gonna turn it into an Airbnb. There’s all these things where people would have normally put their house on the market and sold it, but instead they kept it because they just have this incredibly low interest rate.

So that’s the biggest problem. I talked to folks all the time, you know, who are, they own a home and they’re saying they would love to move. They need a bigger home or they want to move somewhere else to different community. But there’s like, I’m never given up that 2% interest rate. I’m not trading 2% for 7%. So until we can figure out a way to incentivize people to find, finally move and get more supply onto the market. It’s not gonna solve the affordability crisis, giving first time home buyers $400 a month for 24 months is not gonna solve it. Okay, we have to find a way to get more homes on the market.

Now, you may be thinking, Phil, how the heck would you do? What would be your solution? Well, one, I actually think lowering interest rates and getting rates closer to that 2 and 3% Mark would incentivize more people to say, hey, I can make a jump from 2.5% to 4.5%. I can deal with it because I have so much equity in my home, I, I can absorb the, the offset.

The other thing that I think that if the government wanted to get involved and they really wanted to do something, I would find some type of finance, financial program to incentivize builders to build more homes or to incentivize Americans to build homes. Maybe it’s like, hey, if you build a brand new home, you wanna meets all these requirements, whatever, we’ll give you a government backed guaranteed, you know, 4% interest rate. I know a lot of people would go and be like, okay, well, I’ll build a new home. And then the home that they live in now, that home would now go on to the market. So essentially, you’re opening up inventory by incentivizing folks to build new homes, increases supply. And as more homes come on the market and inventory goes up and we can service the need of all of these buyers, all of this demand, then we’ll start to see home prices stabilize. Like that’s the biggest thing is we just gotta get this thing stabilized, you know, so that it can be stable for several years while we wait for wages to catch up.

But, you know, I don’t know if that’s gonna happen, but the inflation is absolutely incredible, you know, and so does that happen? I don’t see that there’s any way unless we just absolutely flooded the market with supply of homes, would we see home prices come back down? Not to mention you put Americans in that situation. You have a lot of people who lost thousands upon thousands of dollars if home prices did come down.