housing market Archives - Dr. Rich Swier

Home affordability just hit a 17-year low, which means the dream of homeownership remains unattainable for the average person. Amid a cost-of-living crisis, saving enough for a down payment and then affording a monthly mortgage payment has become a Sisyphean task—and radical leftist policies are to blame.

Adding up the monthly cost of principal and interest on a mortgage, property taxes, and insurance amounts to half the average wage earner’s monthly take-home pay. That would be a stretch even in good economic times, but it is downright impossible when the prices of necessities such as food and energy have exploded over 20% and 50%, respectively, in less than four years.

When people are already borrowing on credit cards just to pay for groceries, spending half your income on housing just is not doable.

Even scarier, the cost to own a home in about one-third of the country requires more than 60% of the average wage earner’s take-home pay: more than twice the recommended guideline.

But the problem is also widespread: In 98.8% of counties nationwide, homes are less affordable than their respective historic averages.

Today’s stratospheric homeownership costs and the frozen housing market resulted from the fatal combination of record-high home prices and rising interest rates. Both factors are the result of the radical Left’s big-government agenda.

Forty-year-high inflation was created by a profligate Congress and White House spending trillions of dollars that the nation did not have. In 2020, the year before the radical Left took control of the federal government, prices rose just 1.4%. Just 18 months later, prices were rising almost that fast in a single month.

Just as the predictable result of government overspending was inflation, so, too, was the rise in interest rates that followed. The sheer size of the multitrillion-dollar deficits of the last several years caused prices and interest rates to jump significantly.

That means you not only need to borrow more when buying a home, but you will pay more interest on the loan too. The result is a monthly mortgage payment on a median price home that’s twice as high as it was in January 2021.

Ordinarily, high sale prices would entice home builders to construct more houses and increase their profits. But inflation has driven up the input costs for building a home to record highs, eating away at homebuilders’ profit margins. That means fewer new homes are being added to the market.

Simultaneously, many existing homeowners have a huge incentive not to sell: They can’t afford to lose their ultralow interest rate. Millions of people got mortgages or refinanced loans at around 2% or 3% in 2020 and 2021. Selling their home today means losing that interest rate in exchange for one at 7% or 8%.

Since that’s prohibitively expensive in many cases, sometimes doubling the monthly mortgage payment, homeowners are locked in with the golden handcuffs of yesterday’s low interest rates. That means fewer existing homes are being added to the market, in addition to the shortage of new homes.

The situation is so bad that home sales have plummeted to the lowest level of the 21st century, even below the numbers seen during the government-imposed lockdowns of 2020, when it was illegal just to go home shopping in many states.

Today’s housing market would be painful enough if it happened in a vacuum, but the policies of the radical Left have made virtually every aspect of life more expensive, not just homeownership. This has created a divide between those who were fortunate enough to buy a home before the radical Left implemented their agenda and the rest of America who seem doomed to rent forever.

The only way to change that bleak fortune is to reverse the public policies that got us here. Before the dream of homeownership can be restored, the big government nightmare must end.

Originally published by Restoring America

AUTHOR

EJ Antoni

EJ Antoni is a public finance economist and the Richard F. Aster research fellow in The Heritage Foundation’s Grover M. Hermann Center for the Federal Budget. EJ on X: @RealEJAntoni.

The far Left’s actions with regard to tax policy rarely match up to their lingo. Whether it’s John Kerry’s tax savings by docking his boat in Rhode Island rather than Massachusetts to dodge the penalty, or the Clinton’s avoidance of a hefty real estate tax bill by using slick accounting, it’s clear that the far-left’s luminaries do not practice what they preach.

As I reported in August when I wrote about the mass exodus from high-tax states toward more profitable areas, a number of blue state residents are following the same “do as I say, not as I do” approach. To be fair, many of those fleeing blue states for more business-friendly environments are conservatives fed up with having their hard-earned money pilfered by the blue state tax-vacuum, but the laws of probability state this exodus cannot be comprised of conservatives alone.

With the release of a new batch of IRS tax migration data for the 2013-2014 filing year, the evidence keeps piling up that Americans are voting with their feet, and their feet are voting for lower-tax, business-friendly states. This data has to be devastating to tax-and-spend liberals who keep insisting that the economic arc of history bends in their direction, but when the IRS data—along with something as simple as market-based U-Haul rates—conclusively indicate otherwise, it’s time to reevaluate that approach.

So, who are the winners and who are the losers? Again, low-tax, business-friendly, Florida and Texas are the big winners, while the high-tax, big government states like New York, California, Illinois, and New Jersey are the big losers.

Recently released IRS tax migration data from the 2013-2014 year indicate that an astonishing 5.4 billion dollars in taxable income fled the state of New York alone, while 4.2 billion left California (hat tip to Jim Pettit, who has written frequently on this topic, for organizing the data). Where is the money going? Florida enjoyed an influx of 10.6 billion dollars in income and Texas gained 4.9 billion. This is in addition to the 17.5 billion, which flowed into the top four finishers, Florida, Texas, South Carolina and, North Carolina, in the 2012-2013 filing year.

To be clear, I am not suggesting that tax rates are the only reason that people are leaving blue states for lower-tax red states, but it defies common sense to insist that this isn’t a major contributing factor. I even had someone write to me that it’s “the weather” that best accounts for the shifts. Really, the weather? I’ve heard a number of complaints from Californians about things ranging from taxes to traffic, but I’ve rarely heard complaints about the weather.

Adding to this pervasive “do a I say, not as I do” phenomenon—in which liberals vote for higher taxes and then move away from regions where their policies have won the day—is that the migration is happening at the county level as well.

As reported by Andrew Blake in the Washington Times and congressional candidate Frank Howard, Washington D.C. and its surrounding suburbs, which overwhelmingly vote Democratic in local, state, and federal elections, witnessed nearly 2 billion dollars flee from the city and its surrounding bedtime communities.

I witnessed this firsthand during my campaign for Congress.

I witnessed this firsthand during my campaign for Congress. I would knock on doors in Frederick County, MD, a largely conservative county just north on I-270 from Montgomery County, a D.C. bedtime community, which has zero countywide elected Republicans. People in Frederick would tell me that they just moved in. When I inquired, “Where from?” they would often respond: “Montgomery County. You just can’t run a business there.”

There’s a crucial election cycle right around the corner. If you are running for office, or supporting someone who is, please do your future constituents a favor and tell them in a clear and well-thought out message why you are running, and why people are running away from tax-and-spend liberal governance.

EDITORS NOTE: This column originally appeared in the Conservative Review. FULL DISCLOSURE: Frank Howard, referenced herein, served as Dan Bongino’s campaign chairman for a brief period during his 2014 congressional campaign.

Tag Archive for: housing market

Florida and Texas Win Again