The most important housing story of 2017 so far might be by Lorraine Woellert, a veteran of Bloomberg and Redfin who’s now with Politico. On July 7, she published a piece about what is really challenging home ownership in this country. It brings together all of the main housing issues of the day into one place.
Here’s the basic premise of today’s housing challenges:
-Home prices are rising faster than incomes, especially in places with good, higher paying jobs.
-Builders aren’t able to add inventory fast enough to offset home price increases.
-Lenders—led by the Fed plus government sponsored enterprises Fannie, Freddie, FHA, and by the Fed—compensate with lower rates and loosening guidelines, which can lead to borrowers not being able to afford their homes later. We’re not nearly at NINJA loan guideline levels that led to the last financial crisis, but the system is allowing people to spend half their pre-tax on debt with almost no down payments, and this doesn’t leave much slack for economic or job growth corrections. And if borrowers are taking ARMs rather than fixed loans, that can compound this issue
-Local rules dictate how much builders can build much more than Federal rules, so more building cannot really be solved in Washington.
To understand how to begin solving housing problems, you first have to understand the issues Woellert has laid out.
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