The U.S. has been experiencing a housing crisis for quite some time now. It’s a combination of bad luck and mismanagement of the economy. But it’s improving upon its mistakes, and experts believe that it can be solved in due time.
No one knew when the housing crisis started. Many believed that it began when the market crashed in 2008. While some others thought it started way before that, in 1999, when we struggled to put up enough houses for homebuyers. Regardless of when it started, the housing crisis is a serious problem and a hindrance to the American dream.
Home Prices
The home crisis isn’t just about homelessness. It’s about mismanagement of the economy to the point that people can’t purchase even the cheapest homes in the market.
Right now, the average price of homes is $300,000. That’s a massive 16% increase from 2019 and the years before. Despite mortgages being at an all-time low, the average American family still can’t afford to purchase a regular home this year.
There are different reasons why home prices are so high this year: the pandemic, material, and manpower shortage.
The Pandemic
The pandemic damaged the US economy better than any crisis during the last decade. Many home prices rely on the stability of the economy. This domino effect has increased home prices by two-fold. However, this is not to say that home prices stopped rising. The rise has always been there. The crashing economy just exacerbated the problem.
Material and Manpower Shortage
Due to quarantine restrictions, material and manpower shortage has made it even more expensive to build homes. This leads to the lack of supply, and the lack of supply despite high demand means prices are going to soar high.
When the average citizen can’t purchase a home with or without a mortgage, that’s when you know you’re having a housing crisis. People are getting debt, and this is scaring many Americans from purchasing a home. Small businesses are also struggling to supply this need because most are closing because of the pandemic.
Consumer Fears
Consumer fears are leading to a lack of support. Without support from consumers, the real estate market is unstable. This exacerbates the housing crisis and further plummets the real estate market down. It will recover, but only if people start to trust the market once again. One way to do this is by making real estate developers more responsible for the longevity of their projects.
Solutions
Responsibility From Developers
The reality is that real estate developers shouldn’t just give people homes. They should also provide them with the ability to maintain them. For example, professional exterior home painters are essential to every home, yet no real estate developer offers free maintenance for the first five years of a home purchase. This is problematic for many homeowners because mortgage prices are already so high that they can’t pay exterior painters to maintain the paint outside their homes.
This eventually leads to the depreciation of the property. Some homes can even collapse without this essential service. This is just one example of how responsibility should also be given to the developer and not just the buyer.
When developers decide to take more responsibility for the longevity of their projects, the less likely consumers will fear the market. When consumers gain confidence in the market, the more they’ll contribute to its stability.
Smaller Homes
If we want to at least make a dent in the housing crisis, we’ll have to push for more homes, even if they’re not as big as before. American homes have been the biggest in the world for many years now. Compared to many homes in the world, American homes have a 100% increase in space. Over 200% when compared to places like Japan and Hong Kong. We don’t need that much space.
Smaller homes are more affordable. This means it complements the low mortgage prices we are experiencing this year. The more people can afford a home, the more we can solve the housing crisis together. But this requires people to decrease their expectations by a bit.
Better Government Loans
Lastly, the government should also get involved with much better loans. We already have good loans from the Federal Housing Administration, but they’ll have to step up more this year if they want to help solve the problem. No down payment for homebuyers this year would certainly make that difference.
The housing crisis is an economic problem that’s affecting many Americans. But by developing confidence back into the market, creating smaller homes, and having better government loans, we can put a dent into this crisis and maybe solve it in the near future.
