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        <title>Huntsville, Al Real Estate Blog</title>
        <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/tags/housing-affordability/</link>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/housing-affordability-crisis-trends-impacts-and-solutions.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/housing-affordability-crisis-trends-impacts-and-solutions.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Housing Affordability Crisis: Trends, Impacts, and Solutions</title>
    <description> <![CDATA[ 
Housing Affordability Crisis: Trends, Impacts, and Solutions





Understanding the current housing affordability crisis requires an in-depth look at its causes and impacts on various demographics and industries. Let’s look at the factors driving the crisis, including inflation, rising interest rates, and supply shortages as well as the effects on homeownership rates in cities like Huntsville, the implications for businesses and their employees, and potential solutions to mitigate the issue. From tax incentives for investors to encouraging smaller home construction, the following sections provide insights into addressing the housing challenges faced by many Americans today.


Understanding the Housing Affordability Crisis


Housing affordability is at a multi-decade low for several reasons. The first reason is inflation, which has resulted in higher prices. We have record prices almost every year due to inflation, but there has been a significant increase from the Covid money influx starting in 2020, leading to nearly a 40 rise in home prices.


The second main reason for this affordability crisis in the US is higher interest rates. We've seen higher prices due to inflation and money printing over the past few years, but when combined with higher interest rates, the cost of borrowing money to buy a home has increased. Most people borrow money for their first, second, or third home, and this combination has worsened the affordability crisis. Previously, interest rates were in the high 2 to low 3 range. Now, we're averaging around 7 on a 30-year mortgage, with rates reaching as high as 8.


Interest rates have more than doubled in the last few years, and higher prices and interest rates have created the current affordability crisis. Typically, higher interest rates would soften the real estate market, so what has created this unique situation? The difference lies in the lack of supply, which dates back to the Great Recession. Builders slowed down production, and banks stopped lending, resulting in fewer homes being built while the population continued to grow. Over a decade and a half, this has led to a deficit of about 6 million homes across the US. Even with reduced demand, there is still not enough supply.


Prices are always influenced by supply and demand. Despite lower demand, the insufficient supply has caused prices to continue rising, contributing to the housing affordability crisis. Additionally, rising interest rates have exacerbated the crisis not only through higher rates but also through a mortgage rate lockdown effect. Many potential sellers with rates in the high twos or low threes are not motivated to sell their homes if they have to trade for a rate around 7.





Decline in Huntsville's Housing Affordability


The most recent housing affordability index numbers for Huntsville came in at 89. A score of 100 means the median household income can afford the median-priced home. So, a score of 89 means the median household income cannot afford the median-priced home. Anything below 100 indicates less affordability, while anything above 100 indicates more affordability.


In the past, Huntsville often scored well above 100, in the 160 to 180 range, making it a highly affordable place to live. Now, with a score of 89, we are less affordable than before. The US average is slightly better at 96. Despite this drop, Huntsville is still more affordable than many comparable and larger cities that we compete with economically. While we are less affordable than we used to be, we remain more affordable than many other competitive cities vying for jobs, industry, and business.





Addressing the Housing Affordability Crisis





This housing affordability crisis has created challenges for many businesses. Large companies have contributed to this crisis by driving up home prices in their areas. The &quot;Amazon effect&quot; illustrates this well; whenever Amazon announces a new plan or enters a new city, real estate prices rise. Their workers often struggle to afford these higher prices. To address this, Amazon has invested $3.6 billion to preserve about 35,000 affordable homes. This initiative could set a new trend across the US. Affordable housing near workplaces is crucial for attracting and retaining talent. Amazon is leading the way with this effort, and we can expect to see similar initiatives from other companies in various cities.


Another trend to address the affordability crisis is the construction of smaller homes. The average size of new homes is decreasing year over year. We will likely see more two-bedroom and one-bedroom homes being built. Builders, both locally and across the US, are already discussing this shift. In the Huntsville market and nationwide, this push for affordability means many individuals and families, especially first-time homebuyers, will have access to homes in the lower $200,000 price range.





The Decline of the Middle Class and Homeownership


The housing affordability crisis in the US is causing the middle class to shrink. We need to do everything we can to protect the middle class and the dream of homeownership in the US. Homeownership rates are declining, dropping from 66 to 65.6.


This 0.4 decrease may not sound significant, but it translates to about half a million fewer homeowners. This is a substantial decline in homeownership dreams and wealth-building for US citizens. Homeowners have an average net worth of $396,200, compared to only $10,400 for renters.


Solutions to the Housing Affordability Crisis


How do we solve this housing affordability crisis? One challenge is that we can't undo inflation, and the money has already been printed. So, what can we do moving forward as a country to address this issue?


One solution is to provide tax incentives for investors to sell their homes. Many homes in this country are owned by investors, most of whom own between one and nine properties. If we motivate these investors to sell, it could increase the inventory of starter homes, benefiting first-time homebuyers.


Another solution is to offer incentives and reduce regulations for builders to boost home production in the US. Unfortunately, builder confidence has recently declined, and home production is decreasing when it needs to increase to close the gap of 6 million homes. Even reducing this gap by 600,000 homes per year would take a decade to solve the problem. We need to encourage builders to continue production to prevent the problem from worsening and improve it over the next decade.


A third solution involves legislation targeting hedge funds that own over 100 units. As more hedge funds enter the homeownership market, it reduces opportunities for middle-class and first-time homebuyers. Addressing this could help preserve homeownership dreams for these groups.


 



 ]]> </description>
    <pubDate>Fri, 05 Jul 2024 10:00:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/huntsville-al-housing-market-report-zillow-weighs-in-on-housing-crisis-a-closer-look-at-the-challeng.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/huntsville-al-housing-market-report-zillow-weighs-in-on-housing-crisis-a-closer-look-at-the-challeng.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Zillow Weighs in on Housing Crisis: A Closer Look at the Challenges &amp; Solutions | Huntsville, AL Housing Market Report</title>
    <description> <![CDATA[ 
Zillow Weighs in on Housing Crisis: A Closer Look at the Challenges &amp; Solutions





The housing crisis in our country has reached a critical point, and Zillow has stepped in to shed light on its severity. Many economists have attempted to determine the size of this crisis, with estimates ranging from 2 million to over 6 million homes. Zillow came up with a pretty common-sense approach and the number they came up with was about halfway in the middle, which was 4.3 million homes.


I really like the approach that they took which was based on their search volume and their search portal, alongside assessing the current housing demand. According to their findings, they believe there are 8 million families across the US in need of housing. However, the available housing units are only 3.7 million. So, when you subtract 3.7 million from 8 million, the result is 4.3 million homes that we are currently lacking nationwide, highlighting the pressing challenge we face in the realm of affordable housing. We'll look at the origins of this crisis, the factors escalating the it, and the challenges we must overcome.


How We Ended Up in a Housing Crisis


 


To understand the genesis of this housing crisis, we need to consider two distinct periods of time. The crisis first began in 2008 following the financial crisis. During this period, banks significantly reduced their lending activities, builders scaled back their construction of new homes, and developers were less involved in creating new communities.


Between 2008 and 2015, we failed to keep up with the pace of family formations, leading to a growing housing deficit that continued to worsen from 2015 to 2021, particularly during the pandemic stages. The demand for housing simply surpassed the available supply during this period. To give you an idea, in 2015, we had a 2.7 million home deficit, but it increased all the way up to 4.3 million by 2021, a 1.6 million increase over that six six-year period. The primary reason for such a large increase was that there were 7.9 million new families that were formed, while only 6.3 million homes were built during that timeframe.


Challenges Facing Housing Affordability


Now we find ourselves in an extremely challenging situation with a 4.3 million homes deficit across the US, according to Zillow. The combination of higher interest rates and insufficient supply to meet the demand is causing housing inflation to persist, preventing prices from becoming more affordable. It's going to take a lot of work and a lot of effort to build our way out of this. Zillow cited several challenges that we must address as a nation to overcome this affordable housing crisis.


One of the key challenges identified by Zillow was the presence of land use restrictions imposed by local governments, along with delays in obtaining building permits. That's one of the things that we've really got to prioritize here in Huntsville, Alabama to prevent us from getting a huge deficit here in our area, we need to expedite building permit and development approval processes for new communities. We also need a lot more affordable housing in terms of multifamily development.


The other challenge, that we don't experience as much here but it is likely to come up, is the &quot;we want affordable housing, but not in my backyard&quot; situation. The challenge is we need more affordable housing. Everybody wants to be able to have a home because we need to have schoolteachers and police officers to be able to afford homes close to the community. But the challenge that a lot of people run into is, yes, I want that, but I don't want that right next to my community because that can affect property values.It poses a significant obstacle in our quest for increased affordable housing. While there is a collective desire for accessible housing options, allowing schoolteachers and police officers, among others, to reside closer to the community they serve, the issue arises when individuals express concerns about the potential impact on property values if such housing is located right next to their community. Balancing these conflicting interests becomes a critical task in addressing the need for more affordable housing in our community.


That's a sticky challenge that we're going to have to think about as we continue to develop land here in Huntsville to put things to the best use and also protect everybody's best interest. If you’re looking to buy or sell a home in Huntsville, Alabama, shoot us an email at moving@mattcurtisrealestate.com or contact us here.
 ]]> </description>
    <pubDate>Wed, 26 Jul 2023 08:59:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/huntsville-al-real-estate-news-affordable-housing-crisis-continues-to-widen.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/huntsville-al-real-estate-news-affordable-housing-crisis-continues-to-widen.html</link>
        <author>leadrouter@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Affordable Housing Crisis Continues to Widen | Huntsville, AL Real Estate News</title>
    <description> <![CDATA[ 
Affordable Housing Crisis Continues to Widen








Median Family Income &amp; Housing Supply


You know we're facing a housing crisis in this country, but how is that affecting the average family in the US? The median family income in the US is sitting at $75,000. By definition, that means 51 of the family households in the US are making $75,000 or below. Taking into account today's interest rates, a family with the median income can afford to purchase a home priced at $256,000. For the housing market to be balanced and to be affordable, we would need 51 of available housing in the US to be at or below that $256,000 price point. Unfortunately, we're nowhere close to that here in the US.


We're at less than half of that, we're actually sitting at 23. You would think it'd be better here in the South, here in the Huntsville, AL area, but I pulled the stats of last month's data and it's actually even worse. We're sitting at 17. That means we only have 1/3rd of a housing affordable housing supply that we need for the median priced incomes in this area.


Housing Deficits in Median Family Income Ranges


Take a look at this chart on page six and you’ll see it’s not only the median family income range of $75,000, it's really across the board. Starting at $25,000 median family incomes all the way up to $200,000, we're at a 100,00 home deficits across the US at each one of those income brackets.


It actually gets much worse in the $35,000 to $150,000 family income range. We're getting up to 200,000+ home deficits and it peaks at that median family income at nearly 320,000 homes. We have a huge deficit across the spectrum in all price points and all family incomes, but it’s much worse for that median family income that we really need to focus on. If you add all these numbers up and look at what economists are saying, we're at least at a 3 million to 6+ million home deficit across this country.


How This Affects You


What does that mean to you? Basically, housing affordability and supply is not going to get better any time soon. I'm hearing predictions of at least ten years but I personally think it'll be at least 10 to 15 years if we get our act together today in terms of making a dent in this housing shortage that we have and especially affordability.


It looks like interest rates are likely to come down in the next 12 to 24 months. I would not wait. I would find a way to buy a home today, lock in that price and lock in your home. Marry the home, date the rate, and look to refinance over the next couple of years as you potentially get a better interest rate environment.


As we get into a better interest rate environment, there's so much demand sitting on the sidelines that's likely going to push prices up exponentially again unfortunately. My suggestion is take advantage of the market we're in today to get more favorable terms in terms of price and negotiations on your home, then ride that out for when interest rates come down.


If you're not a homeowner yet but would like to be, shoot us an email at moving@mattcurtisrealestate.com or contact us here. There are some affordable options that are out there and there are actually some affordable new construction options that a lot of buyers are simply not aware of yet that we would like to help you get into.
 ]]> </description>
    <pubDate>Wed, 05 Jul 2023 12:26:00 -0500</pubDate>
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