Priced out

If you are hoping to buy a home I have some unfortunate news.

US home prices reached a new high. Worse still, Bank of America claims that housing prices will remain elevated and even continue to rise until at least 2026. The main issue is supply. Housing starts (the number of new homes being built) has remained depressed since the Great Financial Crisis of 2008-2009. As a result, the nation faces a severe shortage of housing which has driven up prices over the past 4 years.

Compounding the supply crunch is pandemic-era low mortgage rates. Specifically, it makes little economic sense for current homeowners with a low mortgage rate to move since a comparable home would end up costing a great deal more in terms price and mortgage payments.

Fixing the housing supply crunch is a longterm problem. Privately owned housing starts as of May have dropped a seasonally adjusted 19% from May last year, while housing completions increased 1% from last year. Higher interest rates make it harder for builders to borrow money to build new homes. In addition, the economic uncertainty of the past year and a half—including many projections of a recession in 2023 and/or 2024—likely made many builders hesitant to go forward with new builds. The nation currently faces roughly 15-years of under-construction of homes, and that problem cannot be remedied overnight. Without a substantial push to build new homes, the housing supply crunch will probably remain an issue for a long into the future.

In an expensive housing market, renting could be the answer. The American Dream—in the classical sense—does include owning a home. However, homeownership should not be at the expense of having little money to take care of the rest of your financial responsibilities. Homes come with many additional costs beyond just the mortgage. Renting, especially in this housing market, can provide a stopgap to save money and live out many of life’s joys in the meantime. Maybe you stash away money for a home while also enjoying more vacations.

@networthnate

Replying to @user349703446552 a case for NOT buying a house! #homebuyer #realestate #finlit #financialfreedom #financialliteracy

This week’s quiz

Question 1

Question 2

Worth with Hoskin Capital

Answers

Question 1

Answer: B

The S&P 500 is commonly referred to as the market

Question 2

Answer: A

A market correction is commonly cited as a drop of at least 10% in the market, but not higher than 20%.