Good News For Affordable Housing

President Biden has said that inflation is on the top of his list and will be addressed. It is reported that this is the worst inflation the U.S. has experienced in forty years. The action plan announced was to increase the supply of affordable housing.

The administration concurs that this will help close the affordable housing gap and “ease the burden of housing costs,” noting that housing prices are a key driver of inflation. This will help the country get the high prices of US homes under control. The S&P CoreLogic Case-Shiller US National Home Price Index reported a rise in home prices of 19.8% year-over-year in February and rent is up 20% over prices seen this time two years ago.

For regular homeowners or those looking to buy a primary residence, this market is challenging. The administration also wants to guide the number of institutional investors who can purchase single-family homes. Another issue that will be tackled is the supply chain challenges and the improvement of building techniques. To ensure that all the construction from 2022 is completed and ready for a homeowner.

The housing shortage has been a big issue and will be addressed. Along with getting more inventory out there, the proposed legislative actions will also put measures into place to help ease costs. These will include tax credits for low- and middle-income home buyers and a proposed $25 billion for grants for affordable housing production.

“The Plan’s policies to boost supply are an important element of bringing homeownership within reach for Americans who, today, cannot find an affordable home because there are too few homes for sale in their communities. And it will help reduce price pressures in the economy, as housing costs make up about one-third of the market basket for inflation, as measured by the Consumer Price Index,” the White House said in a fact sheet.

Housing experts are excited about the administration's plan but do report that it will take time to fix. It is great that the private and public sectors are coming together to help address the housing supply and the increased prices on homes.

“This is the right focus,” Dennis Shea, the executive director of the Terwilliger Center for Housing Policy said. “We’ve under built the housing supply by millions of homes over the past 20 years. Efforts to increase the supply of homes should reduce housing costs for people looking to rent or buy a home.”

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Will Supply-Chain Problems Affect Housing Affordability?

 

Although the hot market and buyer demand have pushed up home prices, the market still shows steady housing affordability. Even though home prices have risen, they are offset by the record low mortgage rates. According to reports, the housing market is not all smooth sailing. The ongoing supply-chain problems around the world have disrupted new construction and renovations.

The National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) reported that 56.6% of both new and existing homes that were sold between July 2021 and September 2021 were affordable for U.S. families earning a median income of $79,900. This is the lowest affordability level since the first quarter of 2012!

The HOI also revealed that the U.S. national median home price rose to a record $355,000 in the third quarter. This is a rise of $5,000 from the second quarter of 2021 and a $35,000 increase from the first quarter of 2021. Buyers did not feel the rise because the average mortgage rates dropped by 14 basis points to 2.95% at the same time.

This is good news but there are some setbacks to the market. It has been hard to get materials and product is increasing in price at a fast pace.

“Persistent building material supply chain bottlenecks and tariffs on Canadian lumber and Chinese steel and aluminum continue to place upward pressure on construction costs and home prices,” said NAHB Chairman Chuck Fowke. “Policymakers must fix supply chain vulnerabilities that are disrupting and delaying construction projects and hurting housing affordability.”

“Interest rates are anticipated to gradually rise in the coming months as the Fed begins to taper its monthly bond and mortgage-backed securities purchases,” said NAHB Chief Economist Robert Dietz. “To keep affordability problems from worsening in the future, policymakers need to tackle supply-chain challenges that are hindering new home production. Helping builders boost output will also slow the rapid rise in home prices that has occurred over the past year.”

The five most affordable housing markets around the country currently are Lansing-East Lansing, MI, Pittsburgh, PA, Indianapolis-Carmel-Anderson, IN, Scranton-Wilkers-Barre-Hazleton, PA and Harrisburg-Carlisle, PA. The five least affordable major housing markets are Los Angeles-Long Beach-Glendale, CA, Anaheim-Santa Ana-Irvine, CA/San Francisco-Redwood City-South San Francisco, CA tied for second, San Diego-Carlsbad, CA and Oxnard-Thousand Oaks-Ventura, CA.

For the small housing markets, the five most affordable are Davenport-Moline-Rock Island, IA-ILL, Monroe, MI, Sierra Vista-Douglas, AZ, Fairbanks, AL and Wheeling, WV-OH. The least affordable small housing are Corvallis, OR, Salinas, CA, Napa, CA, Santa-Cruz-Watsonville, CA and San Luis Obispo-Paso Robles-Arroyo Grande, CA.

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