From afar, the U.S. housing market looks healthy, with high demand and low mortgage rates. But on the ground, expensive supply mismatched with a pool of first-time and low-income buyers tells a different story.
CNBC reports that one reason inventory is scarce in the lower price range is because builders can’t afford to construct affordable homes with the current costs of land, labor, materials, and regulatory compliance. Only two percent of newly built homes sold in August were priced under $150,000, and just 14 percent priced under $200,000.
The trouble is, even though the market is woefully mismatched, home prices will not come down as long as there are some buyers out there willing and able to spend more and more money for less and less house.
"It's time we stopped sugarcoating the truth with this data — the simple fact is that we are severely underproducing housing in this country, relative both to basic demographics and currently high demand from buyers," wrote Svenja Gudell, chief economist at Zillow. "Buying conditions, in theory, are great right now: Jobs and incomes are growing, and rock-bottom mortgage interest rates are helping keep financing costs low. What's missing from the equation is a lack of homes actually available to buy at a price point that's reasonable for most buyers."
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