What is really happening with U.S. Housing Market?
By now, this is headline news more than the war in Ukraine for most U.S. media outlets. The rising cost of home prices + even more rapidly rising mortgage rates force many Americans to reconsider their dreams of buying a home. We all know that coastal cities have been super popular and expensive but now mid-major cities and the central U.S.A have joined the party and become an unreachable market for many middle-class Americans. On top of the housing market, we’re faced with high inflation, basically forcing many people to suffer and re-calculate their finances. The end result — many cannot afford to purchase homes. And the rents are rising too. This is a major problem for all of us.
The American Dream is no more.
Since COVID-19 started in 2019, homelessness has increased dramatically and caused social and safety problems in major U.S. cities like Los Angeles, San Francisco, and New York City. These cities are supposed to be filled with highly-educated, well-paid, and well-being citizens, but are now filled with more homeless people and less law-abiding citizens as they are tired of the high cost of living and fleeing to lesser expensive cities.
Since the last housing bubble and financial crisis in 2008, the U.S. homebuilding has essentially stopped and is now causing major supply-and-demand problems for most cities. Econ 101. Supply and Demand. When supply is low, the demand is to spike. And we’re seeing that right now with our own eyes. The COVID-19 and slow manufacturing caused major law material movement, causing home developers to delay their home building as well as increasing the initial price since it costs more to build homes now than ever. What used to be $100K to build is now $180K, so builders are forced to put that price tag on the customers — us.
The U.S. Government is late to the party as usual. Trying to cool down the scorching housing market by raising the mortgage rates, but it only impacts us the middle to low-class families as we rely on mortgage loans to purchase homes. Big and rich people don’t borrow loans, they pay in cash, so the mortgage rates don’t matter to them. And these are the people buying 2nd and 3rd homes as real estate investments, not to live in these homes. The families trying to buy and live are forced with higher costs with the mortgage rate spike in March & April 2022.
Many experts say it will crash but then the other experts say it will not slow down and continue to rise until 2024. Who the hell knows? Shit is already messed up and we’re simply given a terrible situation to live in. These experts are probably the ones buying up that 2nd and 3rd homes and creating a buzz that the market will continue to rise — so they can make profits off it in two years.
I have no idea what will happen. Nobody knows. There is no future telling, but based on what we learned in 2008, it looks like this is a simple supply-and-demand problem. Many mid-market cities are now becoming popular, thanks to teleworking ability. People are no longer required to travel to the center city to work, they can live wherever they want and still be able to be employed. This is a major win for employees who can find a lower cost of living in cities to live to stretch their earnings. Hence we’re faced with supply-and-demand to those mid-market cities in AZ, CO, TX, and UT just to name a few. Other states like NC, SC, and TN are probably rising too.
I own a home. Paid higher than the asking price. I am one of the lucky ones to purchase before the mortgage rate spike in March. Since I own a home, I selfishly want the market to be hot and increase my home value, but at the same time, I feel for those looking for homes. This is depressing to see. When I came to America in the late 90s as a teenager, I surely hoped that one day, I will be able to own a home and live with a beautiful wife. I have achieved that dream, but with an incredibly high amount of mortgage loans which I have to pay for the next 30 years. Nobody told me about that part when speaking about the American Dream.