A housing crisis? Location, location, location
Housing is expensive here in East Providence. It’s even more expensive in Boston, an hour from here. Some folks live in Rhode Island and commute to Boston.
When we were house-hunting in the Providence area in the Spring of ’22, the real estate market was white hot. We were out-bid on three offers. Making an inspection a condition was an automatic reject. In the event, the house we bought never even went on the market.
Over at jabberwocking.com, Kevin Drum argues that the “housing crisis” is really a housing crisis in California. He also takes on the argument that the big barrier to building new housing isn’t red tape:
“Outside of California, the evidence doesn’t support the idea of either a red tape crisis or a more general housing crisis. The post-COVID scene did have some weirdness to it that we might not have fully worked through yet, but you shouldn’t get panicky over a couple of years of pandemic weirdness. Nor should you overreact to media accounts of housing in California or the very hottest cities. For 90% of you, the housing market is, at most, a little warmish, nothing more.”
Drum posts graphs to support his argument. This is a bit above my pay grade, and I certainly haven’t surveyed housing markets in towns and medium sized cities.
There isn’t a national housing crisis
That depends on the meaning of crisis. To the houseless or soon to be it’s a crisis in the everyday vernacular ~ an emotionally significant event or radical change of status in a person’s life; a situation that has reached a critical phase. That point in time where things go in radically different direction. For the homeowner in P-Town (both Portland OR & Providence RI) who may or may not sell their house in the next five or ten years
I’m sticking with there aren’t enough qualified builders …
Errant shift key ~ to those who aren’t planning to sell it’s not a crisis
@Ten,
As the title says: location, location, location.
Using numbers from FRED, I’ve been tracking the number of hours of work it takes to pay the mortgage on a median house. Back in the 1960s and into the 1970s, it took about 600 hours or about 1/3 of all paid labor for an individual. In the 1980s, it was up to about 1200 which explains why so many women joined the workforce and stayed there. In the 1990s, it dropped to around 1000, and after the crash late in that first decade of the new century it dropped further to around 800. The number have hours started rising with COVID and is now around 1100, almost as high as in the 1980s.
http://kaleberg.com/public/househours2024.jpg
You probably recognize that interest rates were a big driver of this. They were high starting in the late 1970s, drifted down in the 1980s, fell in the 1990s, rose a bit and then fell again when the real estate bubble deflated late in the 2000s. Now, they’re up again, so it takes more hours of work to buy a home. People who already own a home and have no intention to move will not notice the rising cost, but people who want to buy whether for the first time or when moving are going to notice. Note that this affects renters too. A lot of landlords have to pay mortgages, so the rents they set are going to reflect housing prices and interest rates.
In his article, Drum analyzes the housing shortage by counting housing starts and vacancy rates, but that’s only part of the story. He ignores the increased friction associated with finding housing at the margin.