intercst
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Part of the affordability push directed at housing. Will lower mortgage interest rates. Have experts estimated how much?
Also penalty free withdrawals from 401k and 529 plans for first time home buyers.
A push to reduce regulatory paperwork for new construction.
Anything else?
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Lack of supply is the elephant in the room. Lower interest rates, while welcome, actually support higher purchase prices. Must find a way to incentivize the building of more starter homes.
Starter homes (~1200 sq ft or less) used to be about $100k in my area less than a decade ago. They now go for $200k.
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I just looked up one in my old neighborhood to check myself. 960 sq ft, built in 1999 for $96k, was worth $106k in 2018, now lists for $193k per Zillow.
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Oh, this is something we should definitely be encouraging. Nothing like putting people on the dole when they retire.
JimA
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Lower mortgage rates help unlock the housing market, easing the pain of going from a lower interest rate.
DB2
That helps existing owners marginally, but doesn’t help first time buyers. The greatest amount of price inflation has occurred in the lower end of the market due to lack of supply.
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I think the idea is that helping existing owners helps improve supply. If you’ve got a mortgage at 3.5% and current rates are 6.5%, you’re far less likely to sell your house because the mortgage itself is so valuable. The mortgage disappears on sale - so that’s a deadweight loss to the parties in the transaction, which impedes sales. If current rates drop, your mortgage becomes less valuable, making sales more likely.
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Oh I get the idea, I just know (and you likely do too), that there still is not enough supply of those smaller FTBuyer homes. It doesn’t do much to make MORE of those 960 sq ft homes available at pre-pandemic prices.
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Well, sure - but we stopped building single-family homes of that size decades ago. Average size of a new home in 1995 was already over 2,000 square feet. No one’s going to build SFR like that anymore or ever again, for a variety of reasons. And since it’s been decades since builders were making stuff like that, it’s highly unlikely that the availability (or lack thereof) of SFR that small is causing current the current affordability problem in SFR housing relative to the recent past. If you’re looking for a home that size, you’ll have to be in multi-family.
That is true. At the same time first-time buyers are a minority of the real estate market.
DB2
Many places there are still many of those older homes from post WWII around. They are affordable. Sometimes found in good school districts. Often located for easy commute. First time buyers should give them a careful look.
I’m sure they do. But a lot of that housing stock isn’t necessarily a good fit for first time buyers. A nontrivial chunk of that inventory isn’t in the right place - it’s in cities where people (and jobs) just aren’t located any more. In the post WWII housing boom, we lived in the Rust Belt and certain areas of the northeast far more than we do today. In 1950, cities like Detroit, Cleveland, St. Louis, Buffalo, and Baltimore (to name a few) had a combined population of 4.2 million, or just under 3% of the country. Today they have a population of about 1.6 million, or less than 0.5% of the country.
Homes with an “easy commute” and in “good school districts” tend to be expensive, and have probably been expanded or completely rebuilt in the intervening decades. No doubt some still are around - but a non-trivial portion of those will be gunked up by having mortgages that were refinanced at half of today’s rates.
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Buyers should definitely research all aspects. In the St Louis area, I can easily name school districts with excellent schools and homes built after WWII. Many are small compared to the ideal family home. But its an excellent way to build equity to upgrade later–usually in 7 years or so. More space needed as the family grows.
St Louis has an excellent highway system. You can be anywhere in the area usually in 20 minutes. Brentwood has excellent schools, low cost housing (often purchased to demolish and rebuild as a McMansion). An easy commute to universities, hospitals, major employers. And low property taxes due to large commercial and industrial district.
South St Louis has many attractive homes built in this era. Public schools not so good, but excellent parochial schools.
Many would also name Crestwood area. Excellent Lindbergh school district. Many affordable houses built after WWII.
What works for you. Many choices if resources are limited. Home ownership is very possible.