When did the economy stop pushing for home ownership?

Question

I wanted to start a discussion to understand why a) housing is no longer affordable & b) why so many rental/apt properties are popping up nationwide.

My reasoning behind my inquiry:

From recent reports of price gouging, large investment firms buying single family home, property management monopolies, and the possibility of a housing market crash, I have become extremely concerned I will never be able to own a home and will be renting with little to no options to build equity from a young age.

While I see brand new complexes being built all over the country, the prices don’t reflect the communities they reside in. Most areas aren’t dealing with lack of housing, but the lack of affordable housing.

I want to solely blame corporate greed for these outcomes, but this is just my speculation and want to be informed on what’s really causing the housing market crisis.

Chris Seveney · Answer

@Jacob Ofei

Have you ever played monopoly. Each player starts out with $1500

You play a few rounds and each team owns some properties etc but there are still on properties on the board which we will say get auctioned. Let’s say everyone has earned some money and now has 3,000 over time.

If the bank all of a sudden gives everyone $1200 to buy limited properties, what is going to happen? Will they sell for more or less?

The U.S. government dumped $6.4 TRILLION into the money supply.

How is that corporate greed? It’s called supply and demand of capitalism.

If you owned a home and could sell it for more than it’s worth, will you say “nope I am good I just want my money back and sell it for less than it’s worth?

Also the comments about housing and affordability - look to your lawmakers. When a builder has to pay a school impact tax, a water sewer fee, permits, build to specific specifications…. Before they put a shovel in the ground they could be into the property for $50k just for this process. Who do you think pays for this?

Check this out as an example:

https://www.montgomerycountymd.gov/DPS/Resources/Files/Fees/Impact-Taxes-Handout.pdf

Bjorn Ahlblad · Answer

@Jacob Ofei Welcome to BP! Part of what you asked is addressed above. What I gathered from your post was "how can I make more money". Look for specific courses at a college or on the job training. Invest in yourself and raise your value, let your employer know your desire, they might offer OJT or even pay for your training at a college etc. Learn pubic speaking, get into sales, set goals for yourself and keep reviewing your progress. Sign up for a Tony Robbins session. All the best!

Luka Milicevic · Answer

@Jacob Ofei

I'm a bit late to this discussion but wanted to add a few thoughts here.

@Chris Seveney kind of nailed it but I have an example I'd like to give you.

I started building homes in 2016. Back then, housing wasn't just affordable it was VERY affordable...and this was in Nashville, one of the hottest markets in the country.

THe first house I built cost $107/sft. That same exact house, with those finishes will cost $170/sft today. I know this because that's how much my most recent project came in at.

I sold that house in 2016 for $380k at about a 4% interest rate. Today, that house is 650k at a 7% interest rate.

Under 400k you could buy a brand new single family home in a highly desirable home in Nashville in 2016.

I remember we were discussing affordable housing at zoning meetings as houses that were sub 220k. Today....you can't get the land for 220k.

So what on earth changed??? Did we evil greedy developers get MORE greedy?

Well, since 2016....

The city of Nashville has added the following changes to building codes:

-Tap fees have quadrupled

-Underground utilities are now required

-Sidewalk impact fees are required

-Urban development overlays have been implemented

-2018 IRC has been adopted (HUGE expense increase)

-Density restrictions have been implemented

-Permitting went from a month to UP TO 6 MONTHS!!!! (Think holding costs)

-The land owners and home owners....well they are greedy too since they are selling lots for double the price.

This is also just local impact, now add to that the federal impact of interest rates at basically zero, forced shut downs of building materials suppliers, and adding trillions of dollars to the money supply. All at the same time.

The amount of complaining about development back when I started in 2016 on facebook pages was overwhealming. Developers were public enemy number one, but housing was affordable. People were calling on the city to "do something", well they did....and since then the cost of housing has about doubled thanks to their efforts.

This is just my observation. The state is the true enemy of the people.

Mike Dymski · Answer

$7 trillion in stimulus, loose monetary policy, going to war in Ukraine, tariffs, limited drilling, and 5-10 million fewer workers (limited immigration for 1.5 years, mass early retirement during the pandemic, added deaths, millions more on disability with long covid or claims of it).  Whether we like it or not, there are consequences to our decisions and policies.

Jacob Ofei · Answer

All of the replies were very insightful! I’ll try and focus on investing more time in myself rather than moping around complaining (wouldn’t get me anywhere anyway). I have a bit of experience in public speaking, social media marketing, and apartment leasing, so it sounds like I have a decent foundation. My major is information technology so I’ll try and merge these skills into something that will make me desirable to employers who will hopefully pay for my education.

Chris Seveney · Answer

@Luka Milicevic

Agree 100%.  What people don’t realize is we have yet to achieve the scenario where sustainable is more affordable. It is not.

As you mentioned jurisdictions also are charging huge fees to fit their bloated budgets because it’s cronyism at its best

Bruce Woodruff · Answer

This is not new, people have been voicing your thoughts for a long time,. It is always 'too expensive', 'corporate greed', etc.....

And getting the Govt involved is not the answer. The answer is ALWAYS to let the market handle things. Supply and demand will tell those allegedly greedy builders when they have over-reached with their pricing, or number of units they are building. Once people stop doing business with them (ie, not renting their Apts any more) they will have zero choice but to lower their prices. That's how this works.

If you want to buy property, there is absolutely nothing standing in your way....except possibly yourself. Get a better job, move somewhere else that you can afford, get a partner, work 2 jobs, hang out on this forum and learn creative ways to buy properties... :-)

V.G Jason · Answer

Also, take into account the 2008 housing crisis made lending to builders/developers post-crisis a thing to be wary of. That shorted the housing market from what should've been developed.

V.G Jason · Answer

It's not corporate greed. It's government manipulating the money. If you gave everyone more money due to printing money, the right move is buy inflationary-protected assets. It's math, your money is worth a lot less and the asset is a necessity. The manipulation of money also made people not willing to work for less, therefore wages go up therefore byproducts go up. It's a chain reaction. If I have to pay my employees 10% more, my rent 10% more, my product initial cost 10% more, I'm passing that to my customer. This has impacted labor, building materials, city turnaround time for permitting, to get more houses.

Now what's made it crippling is things like the supply chain, the pandemic making remote work more desirable therefore make housing in-demand. There's always demand, but now it's significantly more in demand.

As for rental properties and apartment properties. You have a growing group of SFH owned by investors, therefore it's marketed as a rental. You also have vacant office buildings that don't get the foot traffic they use to and a demand for housing, so conversion is natural.

Your point of lack of housing versus lack of affordability of housing is exactly why it'll be primarily a renter nation, and the allocation of rent to income will tighten sharply. If you don't believe that, can someone please show me how that ratio will ever widen with national debt growing, and therefore money printing as the recourse, won't make houses more expensive over the long haul and your dollar worth less over the long haul?

Now, in your personal situation, and if you are young and you think oh I can never get this. You're wrong, you're at the age where you can define that. I'd be very conservative on debt, not worry about reaching a target at a age(say house by 26), and take risks to elevate your career. I'd keep rent low, no car note, frivolous spending minimized, retirement accounts maxed(401k & IRA), savings a high allocation. The dollar is going to work a lot less for you, so you have to save more and yield more.

Drew Sygit · Answer

Many experts are now pushing for limits on expensive suburban sprawl and instead are advocating for zoning changes to allow denser housing - which should be more affordable.

When did the economy stop pushing for home ownership?

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