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What's Wrong With Housing in America? A four-part series dissecting the housing market--and proffering solutions.


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2019 Jan 20, 12:33am   1,258 views  11 comments

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Housing in America is broken. What does that mean? We simply no longer build enough units to meet demand and keep prices affordable for most Americans. The house price-to-median household income ratio in this country was 2.2:1 until the 1970s. Over time the average rose to 2.8:1. We’re now at 3.4:1.

The figures are much higher in most of our high-growth MSAs – as much as 10:1 – and are particularly troubling since the last three economic cycles have seen a continuing trend of high-performance MSAs capturing a higher percentage of job growth and company formations.

What is truly frightening is that however much of a problem this appears to be today, imagine how harmful it will be if mortgage rates rise to historical averages. Therefore, it’s more critical than ever that we build sufficient housing to keep supply and demand in balance, so safe shelter can be affordable for all.

Part One: How did we get here and why is this a problem across so much of America.
https://www.builderonline.com/money/affordability/whats-wrong-with-housing-in-america_o

Part Two: Why housing is so expensive. Myths regarding why housing is so expensive:

https://www.builderonline.com/money/affordability/part-2-whats-wrong-with-housing-in-america_o

Part Three: Why it is so hard to get enough projects approved to hold down the cost of land.

https://www.builderonline.com/building/regulation-policy/part-3-whats-wrong-with-housing-in-america_o

Part Four: The conventional fixes don't, and won't, work.

https://www.builderonline.com/building/regulation-policy/part-4-whats-wrong-with-housing-in-america_o

#Housing #RealEstate #Economics

Comments 1 - 11 of 11        Search these comments

1   SunnyvaleCA   2019 Jan 21, 1:22pm  

Speaking for just Silicon Valley, which is the locus of this website...

Just as importation of foreign workers brings down wages, it also brings down quality of life. Even if vast quantities of housing were built, the quality of life wouldn't be improved. (Noise, pollution, traffic, congestion, etc would all be worse.)

High tech workers living in the 3rd world are willing to relocate here if the wages and/or living conditions are improved over their current situation. In this regard, living conditions have a long way to fall before we reach equilibrium. Build 10 million apartments in Silicon Valley and triple the population? No problem! Indian and China can supply that in less time than it takes to build the housing. So, that wouldn't help the housing costs much (elasticity of demand and all of that) but it certainly would make the quality of life worse.

I think the right solution (if started in the 1990s) would be for Silicon Valley to be distributed to a dozen cities around the country and then for these American companies to hire Americans. With the quality of life and cost of living greatly improved (because you don't have to move to Silicon Valley) maybe actual Americans would even want to work in high tech and wouldn't require such high salaries either.

For "old timers" like me, the cost of living in Silicon Valley isn't really that terrible because I bought in a while ago — my shack already paid off since it cost me a mere $800k. But what about young Americans contemplating a career (in college or just graduated). For those seeking an American level of quality of life, the lure of high tech and silicon valley is non-existent. I recently asked several of my teenage nephews why they hadn't even taken AP Computer Science and why they weren't interested in starting with a $140k/year salary after a mere bachelor's degree. Answer: Silicon Valley costs and quality of life — at age 15 they already realized the problem.
2   MrMagic   2019 Jan 21, 1:35pm  

jazz_music says
Well that was a lot of reading and predictably the problem with housing is seen that 'that builders jobs aren't easy enough or profitable enough.'


jazz_music says
Developers historically make out hugely on what they develop and STILL they watch that bottom line for a time of maximum return on investment.


Why do you HATE capitalism so much?

You should move to Venezuela, STAT, where everything is equal...
3   SunnyvaleCA   2019 Jan 21, 1:55pm  

MrMagic says
jazz_music says
Well that was a lot of reading and predictably the problem with housing is seen that 'that builders jobs aren't easy enough or profitable enough.'


jazz_music says
Developers historically make out hugely on what they develop and STILL they watch that bottom line for a time of maximum return on investment.


Why do you HATE capitalism so much?

You should move to Venezuela, STAT, where everything is equal...

I think Jazz was expressing that the system is manipulated by the builders and others in the real-estate business. He's saying it isn't capitalistic enough: there's too much information-hiding, leveraging government, sob-stories to sway the politicians, etc.
4   MrMagic   2019 Jan 21, 2:56pm  

SunnyvaleCA says
He's saying it isn't capitalistic enough:


Nope, you haven't been following Jazz's posts. He's a Socialist. He doesn't want ANYONE to think on their own or make money for themselves.
5   MrMagic   2019 Jan 21, 3:17pm  

SunnyvaleCA says
He's saying it isn't capitalistic enough:


Not really..

jazz_music says
Except that this capitalism needs better regulation before people can't live indoors.


I told you he was a Socialist.
6   SunnyvaleCA   2019 Jan 21, 3:30pm  

OK, thanks for the correction guys. I'll try not to give people the benefit of the doubt ... at least without reading their previous posts.
7   Reality   2021 Mar 31, 9:14pm  

anonymous says
Housing in America is broken. What does that mean? We simply no longer build enough units to meet demand and keep prices affordable for most Americans. The house price-to-median household income ratio in this country was 2.2:1 until the 1970s. Over time the average rose to 2.8:1. We’re now at 3.4:1.


The first premise of the article seems to have a problem: It's not taking into account the drastic increase of divorce (and decline of marriage therefore two single adults forming two households instead of one) during those years. Even if there had been no change in population (no one having been born or died), no change in anyone's income and no change in house price since the 1970's, when no-fault divorce was introduced, 50% of existing households going through divorce / splitting in two would turn price-to-median household income ratio from 2.2:1 to 3.3:1 . . . simply because the same amount of total income have to be spread around 50% more households. We haven't even looked at the drastically lower interest rate at this point, or massive increase in unreported grey economy income (such as drug dealing), or the purchase by repatriating dollars bidding up prices. Seems to me overall, the country is over-built too many houses suppressing prices to a level lower than the extremely low interest rate (and the other two factors) should have driven the price up to.

The figures are much higher in most of our high-growth MSAs – as much as 10:1 – and are particularly troubling since the last three economic cycles have seen a continuing trend of high-performance MSAs capturing a higher percentage of job growth and company formations.


This is indeed the real issue: housing prices in the high growth MSA's have gone haywire. It is reflective of a massive domestic population migration to those MSA's . . . which also explains why the housing prices in the rest of the country are falling far behind where they should be given the extremely low interest rates (as observed above). The mass migration to the MSA's was the deliberate policy objective of the Democrats in the last 20+ years packing more and more people into the few over-crowded metro centers . . . so that the Democrat party machines in those cities can enslave the population. The primary means for achieving that policy goal are through printing money shoving into metro centers (through government funded projects and government spending) and through regulations that prevent normal city development (anti-sprawl) as well as regulations that make car ownership expensive. In the 1980's, 80+% of young adults at 20yo had driver's licenses; today, the ratio is less than 40%. If they can not drive (or can not afford to drive), they are forced into metro areas served by public transportation and subject to rent-seeking both by landlords and inner-city stores, both of which are of course exploited by urban political machines, which deliberately create urban decay in order to suck in even more government money for "urban renewal."
8   FarmersWon   2021 Mar 31, 9:20pm  

I feel that we need to fix following things:
1) Family in America. We need responsible parents who can teach value of preserving freedom, self-sufficiency and skill to understand and fight propaganda.
2) Understand our constitution and preserve its core principles.( Some minor changes with time are OK)
3) Freedom to defend ourselves.(Protecting the sanctity of self-defense and bearing arms)

Like in real estate they say Location,Location..Location.

In democracy, I would say:
Free Speech.. Free Speech.. Free Speech

Housing,Medicine and other issues will automatically resolve!
9   Patrick   2021 Mar 31, 9:22pm  

I agree with you on these things @election2020
10   ForcedTQ   2021 Mar 31, 9:39pm  

Election2020, we are not supposed to have Democracy, we are supposed to have Constitutional Republics. The rights expressed in 2A are not just about self defense....
11   FarmersWon   2021 Mar 31, 9:43pm  

ForcedTQ says
Election2020, we are not supposed to have Democracy, we are supposed to have Constitutional Republics. The rights expressed in 2A are not just about self defense....


Thanks for correcting.
You are right!

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