Podcast Summary
Housing shortage causes home prices to soar: The current housing market is experiencing a significant shortage of homes for sale, leading to record high home prices and bidding wars, especially in small towns and rural areas.
The current housing market, especially in small towns and rural areas, is experiencing a significant shortage of homes for sale due to high demand and historically low interest rates. This shortage is causing home prices to skyrocket, making it difficult for many people to afford homes. For instance, in Blacksburg, Virginia, homes are selling for over $400,000, which is much higher than the median income of $89,000. This trend is not unique to Blacksburg, as it's happening all over the US, from small towns to big coastal cities. The housing shortage is a complex issue that has been decades in the making, and it's not expected to be resolved anytime soon. One reason for the shortage is the historically low interest rates, which make it an attractive time to buy an overpriced house. Another reason is the limited housing supply, with less than 2 months of housing supply in the US, compared to the healthy housing market standard of 6 months. The result is record low inventory and bidding wars for available homes.
Baby Boomers' Reluctance to Sell Homes Isn't Creating the Housing Shortage Alone: The housing shortage is a complex issue caused by a lack of new home construction to meet the demand of millennials in their prime home-buying years.
The housing supply shortage issue is not solely the fault of baby boomers. Although they own a large share of real estate wealth in the US, they are not selling their homes in large numbers due to various reasons such as better health and a desire to stay in their communities. Boomers' reluctance to sell isn't creating the housing shortage on its own. Instead, it's a multifaceted issue that requires building more homes to accommodate the growing population of millennials in their prime home-buying years. The housing market would benefit from an increase in housing supply, rather than blaming one generation for the issue.
Baby boomers' resistance to new housing development: Baby boomers' opposition to new housing developments, particularly multi-family homes, in desirable areas contributes to the housing shortage. This behavior, driven by the desire to increase home values, is perpetuated by outdated zoning laws and older city leaders.
The resistance to building new housing, particularly from baby boomers, is a significant contributor to the housing shortage in desirable areas. Boomers, who are often homeowners, have used their political power to prevent new developments, particularly multi-family homes, in their neighborhoods. This behavior is rational from their perspective, as it increases the value of their homes. However, it collectively results in a lack of sufficient housing in areas where it's needed most. Older city council members and mayors, who are also homeowners, often side with existing residents, perpetuating this trend. This resistance to change has deep roots, stemming from policies like redlining that were designed to prevent Black people from buying in white neighborhoods. The result is outdated zoning laws that make it illegal to build anything other than single-family detached homes on the majority of land, even in urban areas.
Outdated zoning laws and lack of skilled workers fuel housing crisis: Decades of restrictive zoning laws and the 2008 housing crisis decimated the supply of affordable housing and skilled labor to build it.
Outdated zoning laws and a lack of skilled construction workers are major contributors to the current housing crisis in the US. For decades, many forms of housing, such as townhouses, duplexes, and triplexes, have been banned in most areas, limiting the number of available housing options. Additionally, during the 2008 housing crisis, the construction industry came to a near standstill, leading to a significant decrease in new home construction and a loss of skilled workers in the trades. As a result, there is now a shortage of both affordable housing and skilled labor to build it. Some cities and states are beginning to address the issue by changing zoning laws, but the lack of skilled workers remains a significant challenge.
Shifting Perception of Construction Trades: Experts predict it will take a decade or more for the construction industry to meet the housing demand and reverse the trend of underappreciating trades, benefiting Gen Z entering the workforce and homebuying market
The construction trades can be financially rewarding, and there's an increasing effort to encourage more people, particularly millennials and Gen Z, to pursue careers in this field. However, it will take time to reverse the trend of underappreciating these trades, and there's a significant housing shortage that may mean homeownership remains out of reach for many, including millennials, for years to come. The experts agree that it will take a decade or more to catch up. This situation might be good news for Gen Z, as they'll be entering the workforce and homebuying market at a time when the construction industry may be able to meet the demand. Unfortunately, Gen X, who are currently in their prime earning and homebuying years, may continue to be overlooked. Overall, the construction industry is undergoing a shift in perception, and it's essential to recognize the value and potential rewards of pursuing a career in the trades.
