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What Happened to Affordable Housing?

If you’ve spent any amount of time browsing Zillow for a new home lately, then you might laugh at the term, “affordable housing.” While it may be a favorite platitude of today’s politicians, it certainly doesn’t represent today’s housing market.

The median price of a single-family home in the U.S. just reached $357,900, an all-time high according to this Bloomberg.com article.

While the pandemic is an easy scapegoat, the current housing crisis has it’s roots in the Great Recession which put nearly 50% of homebuilders out of business when housing bottomed-out in 2009. As a result, homes that should have been built over the last decade never were. Couple this lack of new housing development with a significant increase in the number of new American households that have been formed, and it’s easy to see how supply and demand got so out of whack.

Of course inflation, labor shortages, and supply-chain bottlenecks don’t help, but the source of the problem is much deeper than that.

So if you’re in the market for a new home, what can you do?

Here are a few things to consider:

Increased market prices help you as the seller earn a higher price for your home than you would have otherwise been able to expect.

New construction has always been at a premium, but with the effects of the pandemic, and scarcity of newly built homes, you will be paying even more than you would have previously. Maybe consider looking at existing homes for sale. You could put that unused capital to work as improvements into a property that could be modernized to meet your needs.

Historically low interest rates help increase your overall purchasing power. In periods of higher inflation, a fixed-rate loan will actually decrease in real cost over time.

Property taxes, especially in high tax states like New Jersey, New York, and California, can have a significant effect on affordability. Moving to a lower tax area, or another state, can provide a boost to purchasing power.

If you’re apprehensive about purchasing in this environment, consider renting for a year or two to test out your local market. There’s no shame in renting. Just ask anyone who bought a home for way more than it was worth, and then had to eat a large loss trying to get out from underneath an upside down mortgage if they would have done something differently in the past.

No matter what your personal situation looks like, there are always options. The challenge is making the best decision you can, with the most accurate data you have. If you want help solving that challenge, just complete the form below to setup an introductory call with a Certified Financial Planner™ Professional.

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Joshua Duvall, CFP®, RTP

Joshua Duvall, CFP®, RTP launched his own Registered Investment Adviser in 2017 after more than a decade in the financial industry, working for some of the world’s largest and most successful firms including LPL Financial, New York Life, and State Farm Ins. Co. Married with two children, Josh resides in Tabernacle, New Jersey and is an engaged member of his community. Josh enjoys coaching youth sports, rooting for The Ohio State Buckeyes, and sharing his passion for Jesus through biblical ministry and community service.