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Special Edition: Housing in Crisis? Costs, Challenges, & Changes Ahead
00:21:02
Housing costs have surged in recent years, leaving many Americans wondering: is this a temporary spike or a long-term crisis? In this episode, we break down the state of today’s housing market, the factors driving affordability challenges, and the...
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- [00:00]
A
Today is Saturday, September 6th. We're digging into America's housing crunch. High prices, high mortgage rates and limited supply have left many Americans feeling locked out. So is this a housing crisis? And if so, what can actually be done about it? Today you'll hear from two experts. First, Darrell Fairweather is the chief economist at Redfin. She breaks down the data, the trends and who's being hit the hardest right now. Then later, Andy Winkler from the Bipartisan Policy center explains the bill making its way through Congress right now and why it could be the most significant housing legislation in years. Together, they help us understand what's happening in the market, what policies are on the table and what all this means for anyone trying to rent, buy or sell a home today. Welcome. Welcome to THE NEWSWORTHY Special edition Saturday when we sit down with a different expert or celebrity every Saturday to talk about something in the news. Don't forget to tune in every Monday through Friday for our regular episodes when we provide all the day's news in just 10 minutes. It's fast, fair, fun and on the go. I'm Erica Mandy. It's time for today, today's special edition Saturday. You ready? Let's do this. Darrell Fairweather, thank you so much for joining us here on THE newsworthy.
- [01:12]
B
Thank you for having me.
- [01:13]
A
So first, let's just start with an overview of what the housing market is right now.
- [01:17]
B
The housing market is in a deep freeze. It's been this way since interest rates first went up in 2023. And people are just having a hard time affording a home at these high prices and high mortgage rates. At the same time, home sellers aren't all that eager to sell or to lower their prices because they still have really low mortgage payments that they were able to lock in during the pandemic. So because of that, there aren't that many transactions happening, but it is turning into more of a buyer's market because there are more sellers out there than there are buyers. So if you're able to afford a home, you will have an easier time getting an offer accepted.
- [01:56]
A
Can you expand a little bit more about what you mean when you say it's a deep freeze?
- [02:00]
B
We have near record levels of homes being sold and they improved a little bit this year. But it's from basically rock bottom. We saw this huge surge in activity during the pandemic when interest rates were at 3% for a 30 year fixed rate mortgage. But now the interest rate on a 30 year fixed rate mortgage is at around six and a half percent, which means that home buyers are having to pay hundreds, if not thousands of more dollars every single month for a home that would have been much cheaper if they bought earlier. So instead people are turning to the rental market where rents have been more stable. And if you're comparing say a one bedroom apartment to buying a one bedroom condo and getting a mortgage for that, it's going to be obvious that the rental payment is cheaper than the mortgage payment. So in the short run, people are deciding to rent and it's really causing that freeze in the housing market.
- [02:52]
A
Would you say that the housing market is in crisis?
- [02:55]
B
If I said it was in crisis, I would say it was in crisis for different reasons than what I just talked about. The crisis in the housing market really started even before the pandemic, when Freddie Mac estimated that we're 4 million homes short in terms of the housing supply, that we need to reach affordable levels. Housing is really unaffordable and that's been a problem for years and years now. And mortgage rates are making it worse in the short term. But. But that housing shortage is more of a long term problem that needs to be addressed. The economic situation is also giving buyers some pause. In Washington, D.C. for example, we're seeing the market be even weaker because of how many federal layoffs there have been there. At least that's what agents are attributing it to. And you know, I think that's happening more broadly that people are worried about the economy, they're worried about their job stability, and people don't want to make a big economic commitment like buying a home when they're worried about where the economy is headed.
- [03:54]
A
Do you think this is impacting younger generations the most or is it across the board?
- [03:58]
B
It is impacting younger generations the most because they're the ones who need to borrow the most money in order to afford a home. If you are an older person and you've already owned a home, you can sell that home and get a lot of equity out of the home to put towards your next mortgage, which means you need to borrow less money for that mortgage. And the interest rate impact isn't as severe. The age of first time homebuyers, the median age reached a record high of 38 according to the national association of Realtors. And the share of first time homebuyers in the market is at a record low. So it's definitely hitting young people who aren't yet home buyers the most.
- [04:35]
A
And yet it seems this affordability is impacting Gen Z and millennials renting or buying a home. I know a New Redfin report, I believe, found 7 in 10 renters and 4 in 10 homeowners in in those generations struggle to afford their housing costs and are even making significant sacrifices. Can you speak to that?
- [04:53]
B
Rents have stabilized, but they're still expensive. They went up quite a lot in the post pandemic period when everything was reopening, and they've stabilized since then. But they're still unaffordable to many people. About half of renters pay more than 30% of their income to rent, which means that they are by definition cost burdened and they don't have enough money left over to spend on things like savings or other needs at they might have. So even though renting might be a slightly more affordable option right now, it's not affordable enough, which is why we need to increase the housing supply so there are enough homes, whether you want to rent or own, for everyone.
- [05:32]
A
Are you seeing any significant differences across the country, whether that's in cities versus rural or coastal cities versus the Midwest? What are you seeing there?
- [05:41]
B
Well, there are more homes available in the south because there were more homes built during the pandemic in the South. Think of Austin, for example. A ton of people wanted to move to Austin during the pandemic. Prices went up quite quickly, but then builders stepped in and started building lots and lots of homes, and now prices have moderated. We saw a similar trend in Florida too, and other parts of the Sun Belt. The Midwest is a completely different story. Though. There weren't that many people moving into the Midwest during the pandemic. Prices didn't grow all that much. There wasn't very much new construction. But now that the Midwest is still this affordable option and people can still afford the homes there, even with interest rates being so high, there is more demand and the number of buyers is larger than the number of sellers, which is pushing up home values on the coast. It looks more like the nationwide picture where in general there are more homes for sale and there are buyers. But it's not as extreme as it is in the south. And prices and affordability are still a top concern for buyers.
- [06:40]
A
Obviously during the pandemic, when people had to work remotely, that impacted where people were choosing to live. Now that we're seeing more return to office mandates, is that impacting people when it comes to where they're choosing to live?
- [06:53]
B
It is impacting where people choose to live. The employment situation is a bit precarious right now, so people are having to do as their employers say when it comes to return to office. So they're having to move to job centers in order to find work. Instead of there being as many remote work opportunities. There's still more remote work opportunities now than there were pre pandemic. But the trend has been reversing and it is impacting where people want to live. San Jose, for example, was one of the places that had the biggest increase in remote work because it's a tech sector. But now it's one of the places that people are moving back to and there is more demand and home values are going up quicker there than in the rest of California.
- [07:34]
A
How much are like climate risk metrics, you know, flood areas or fire prone areas affecting new home purchases?
- [07:41]
B
Well, in general, people are actually buying homes in places that are more climate risky. They're moving to the Sun Belt places like Florida, for example. It has high heat risk, high flood risk, high storm risk. But people look at the warm winters and see that as a plus and they're willing to take the sacrifice in terms of climate. But that might be coming to a head now because insurance costs are going up, HOA costs are going up, and it's making it harder and harder for people to afford to stay in a place that's climate risky because in the end, those climate risks, they show up as housing costs, they show up as insurance costs or maintenance costs. So I think it will have in the long run an impact on where people choose to live.
- [08:23]
A
Any thing else, whether it's in the data or just what you're seeing that you think is worth noting that we haven't already talked about.
- [08:28]
B
Well, we have a report coming out soon about the black homeownership rate, how that has been weakening potentially because of what's going on with black unemployment that has been on the rise recently. So I think it's always important to look at those different demographics and how they're being impacted by the economy and how that's showing up in homeownership.
- [08:49]
A
What are you watching for next or expecting next?
- [08:52]
B
I'm definitely paying attention to mortgage rates. There will be new jobs data that comes out that could shift rates. And then there's also the Fed meeting coming up that could move rates. If the Fed decides to take a more dovish stance or signal a more dovish stance, that could send mortgage rates lower and that could in the near term make buying a home much more affordable because rates are the thing that directly impacts how much borrowers pay in their monthly mortgage payments. So if rates were to fall, it could definitely switch things up in the housing market. We could see more buyers out there and potentially more sellers because they might decide that they don't need to hold on to those mortgage rates that they got during the pandemic anymore. Maybe they want to move now.
- [09:39]
A
Still ahead, we shift from what's happening in the housing market to to what Washington is doing about it. Our next guest is Andy Winkler, managing director of Housing and Infrastructure Policy at the Bipartisan Policy Center. He breaks down the road to Housing act why it's being called the most significant bipartisan housing legislation in years, what's in it, what it could mean for homebuyers and renters and sellers, and whether it really has a chance of passing. That's next. But first, a quick break for our sponsors. When I think about pieces that make my life a little easier, both in my closet and when I'm traveling, Quint's comes to mind. I have their washable silk tank, for example. It looks elegant enough to wear to dinner, but it's also practical. I can toss it in the wash and it still looks great. It's that perfect balance of polished and easy. I also have their Carry on suitcase and it's become my go to for trips. It's sturdy, stylish and honestly feels like something I should have paid much more for, but it was a fraction of the price. This is what I love about Quince. They have everything from 100% Mongolian cashmere starting at $50 to wool sweaters and coats that look designer level to beautiful accessories. And by partnering directly with ethical top tier factories and cutting out the middlemen, they deliver luxury quality pieces at half the price of similar brands. Keep it classic and cozy this fall with long lasting staples from quince. Go to quince.comnewsworthy for free shipping on your order and 365 day returns. That's Q U I N C E.com newsworthy to get free shipping and 365 day returns. Quince.com newsworthy the newsworthy is also brought to you by Trade Coffee. So we're working to settle into our new back to school morning routine. But what hasn't changed is that enjoying my coffee from trade is one of the best parts of my mornings. My own little ritual just for me. Trade makes it so easy to have cafe quality coffee at home, whether it's the smooth cold brew on the days that still feel like summer or a warm mug as fall starts to bring those cool cloudy mornings. In fact, Trade works with more than 50 top roasters around the country. So not only am I getting this high quality delicious coffee, but also I'm supporting local roasters around America. I love that you can even take a quiz in under a minute to get personalized recommendations. And if your first bag is not quite right, Trade will replace it for free until they get it perfect. I've said it before, but I think it's so telling. My husband only started drinking coffee and making it part of his mornings too, after I started raving about the coffee from Trade. And right now trade is offering 50% off a one month trial at drinktrade.comnewworthy that's drinktrade.comnewsworthy to get 50% off, half off one month drinktrade.comnewsworthy now to my conversation with Andy Winkler. So would you go as far as to say America is in a housing crisis?
- [12:20]
C
I think I would say we are in a housing affordability crisis. It is severe enough to say that Americans by and large cannot afford housing and are not finding the housing that they need.
- [12:33]
A
Okay, so let's talk about something Congress is considering to address this. It's called the Road to Housing Act. For those who haven't heard about it, can you give us a summary and overview of what it is and a couple of the key things to know about it?
- [12:47]
B
Sure.
- [12:47]
C
It's a bipartisan bill that was introduced in the Senate and essentially it's a collection of bipartisan other bipartisan pieces of legislation that have been introduced sometimes in multiple Congresses over the years. And the bill proposes to do a number of things. It creates new programs, for example, to encourage state and local governments to make zoning and land use changes. It amends existing programs to make it easier, for example, to finance manufactured homes or the purchase of manufactured homes. It's pretty comprehensive in its scope. It has over over 20 bipartisan pieces of legislation that have been introduced by various senators over the years and kind of packages them all together. So it really is sort of the most significant kind of housing legislation or bipartisan housing legislation that's been introduced in quite a number of years.
- [13:45]
A
So what do you think is making it so attractive to both parties in a time when that doesn't feel like it happens very often?
- [13:53]
C
I think sort of two things are at play. One is just the severity of the challenges that we face are creating a sense of urgency. You know, we have homelessness this year, homelessness numbers that were their highest on record. We have a housing market where people are paying more than ever as a percentage of their income on housing. They're not finding homes for sale that they can afford. And members of Congress are like anybody else they hear and see those concerns in their, that their constituents face every day and I think feel a sense of urgency that they need to tackle it. I think the other thing too is that, you know, they haven't done all that much in quite a few years on this topic. We've seen bipartisan infrastructure bill several years ago. We've seen a huge overwhelming Covid response before that. But Congress has not worked to address this challenge. And so I think there's sort of a sense that like this is the. It's finally housing's time to be a top tier policy issue.
- [14:55]
A
You mentioned that this is one big bill of a lot of different elements that have come up before. So why didn't the individual elements pass in the past?
- [15:04]
C
So, I mean, it's a good question. I think they just were not sort of important enough as standalone pieces of legislation to get sort of the time of day. You know, we, over the last few years, especially in the Senate, there's been a really. It's been difficult to get floor time for a lot of standalone pieces of legislation. And with how difficult it is to get bipartisan consensus on things, you know, really the only avenues to pass legislation like this is to attach it to something else. So I think a lot of these bills just haven't found a vehicle to make it through Congress. And this is packaging them together to give them a little better of an opportunity and a chance to make it through both the Senate and the House.
- [15:49]
A
So at this point, are you expecting it to pass?
- [15:52]
C
I'm really optimistic. I think such a strong vote out of committee, unanimous support for the bill in the Senate, in the Senate Banking Committee, is a really strong showing. It says this is a priority. And collectively all of those members can push to get it attached to a different bill or to get a vote on the Senate floor.
- [16:12]
A
Assuming it passes. Do you have a timeframe for when these policies would start taking effect and actually impact the average homeowner or potential buyers? And what do you think would be most effective out of this bill?
- [16:25]
C
I wouldn't expect to see sort of overnight changes. I think this is more about giving local government, state governments, the tools they need to be able to really tackle the housing affordability challenge themselves. Because there's a misnomer in housing, that there's a housing market. There isn't really a national housing market. There are housing markets all over the country. You know, if you think about housing prices might vary between neighborhoods in one city. So really it's about making sure those local officials have the tools they need to be able to tackle the challenge.
- [17:00]
A
What are some potential risks? You know, some people might argue if you do kind of unnatural things to the market, there's always some unintended consequences. For example, people have argued that past first time homebuyer tax credits only caused all home prices to go up, even if it helped some first time homebuyers. So what do you think are some risks, if any?
- [17:21]
C
I think a lot of, especially in the road to housing. A lot of the changes are targeting housing supply in this country. We have a housing supply shortage. It's one of the drivers of high housing costs. And because they are targeting this specific problem, the supply side of the equation, I don't think there will be sort of the negative kind of downsides that something that is on more of the demand side of the equation would cause. You know, a lot of. To your point, the past criticisms about tons of new federal funding, for example, to help people afford housing, is that it just gets captured in the cost of housing. It creates housing inflation. But by targeting housing supply, I think they're actually potentially driving down costs with these sorts of investments, not the opposite.
- [18:09]
A
And just to ask about any other concerns, are there environmental concerns when you're talking about loosening some zoning regulations?
- [18:17]
C
Sure. I mean, I think the risk with kind of unchecked development is that you're building in places that have too many risks. But the way that many of the changes in this bill are targeted, you know, they're really directing that at places that already have housing infill development. If you're thinking about major cities that have empty lots or, you know, that kind of thing, places that are already developed, not opening up tons of new areas to development.
- [18:45]
A
How do the priorities of this bill compare to President Trump's one big beautiful bill? Are there any conflicting priorities or elements there? And even if not, do you. Do we have a sense yet about how the President feels about this and if he might have any influence over, especially Republicans who could be voting on it?
- [19:04]
C
Yeah, I don't think we've seen any the president weigh in yet on, on the actual bill or his administration weigh in on the bill. But I do think some of the priorities within it align with what the President and his administration have talked about. They are really looking at how to streamline existing programs, how to make them faster, how to deregulate federal programs to make it cheaper and easier to build housing. So in that sense, I think a lot of the changes are aligned, but I think it kind of remains to be seen because they haven't really weighed in specifically on the bill yet.
- [19:43]
A
Anything else you want to add about it or just a final thought?
- [19:45]
C
You know, it's a huge sort of opportunity. And especially when you pair road to housing with the changes in the tax code that were made in the reconciliation bill and the one big beautiful bill, there is a pretty significant expansion of the Low Income Housing Tax Credit, which is our nation's sort of primary housing production, affordable housing production tool. Together, that's a really meaningful change at the federal level to support sort of ending this housing affordability crisis or challenge that we have. But it really takes engagement at every level of government the way that housing is developed in this country. You really need to navigate all types of different processes and approvals, and it's going to take changes in each of those levels to be able to really expand production of housing.
- [20:39]
A
Well, thank you so much to both Daryl Fairweather from Redfin and Andy Winkler from the Bipartisan Policy center for all their insights and analysis today. And as always, we'll be back on Monday and throughout the week with the latest news to know each day in about 10 minutes. Until then, have a great rest of your weekend.