Here’s the real reason why home pages are as high as they are… No, it’s not about interest rates or corporate greed, it’s not about anything other than there is a shortage of homes. Millions of housing units are needed in the US, but many cities have costly entry barriers hidden in their permit policies that are inhibiting this much-needed home growth.
The biggest reason that affordable housing isn’t available is because of permitting. Most cities that have a housing problem also have very severe permitting restrictions that make it difficult if not impossible to get a new permit to build a new housing structure without paying hefty permit fees. In some cities, the regulatory requirements add $300,000-$400,000 extra to the cost of building the house, even before you break ground. Sometimes permits won’t even be issued, no matter how much you spend.
According to this article, there are around 5 million homes needed, some numbers estimate upwards of 35 million. And every year, this number is growing. People are creating their own households, graduating college, moving out of their parent’s house, and immigrating, all at rates that don’t align with the need for housing. And with the current housing slowdown and higher interest rates are forcing builders to build even fewer homes.
So the takeaway is that the prices of homes going up has more to do with supply and demand, rather than other factors. The current market can be compared to a game of musical chairs, there are so many people who want to buy, but only so many homes available, and they’re jumping at any good opportunity that’s presented. Naturally, this buyer competition will bump prices up. Even so, people still can’t afford homes and while there may be enough buyers out there, the high prices are creating a barrier for many new home buyers to enter the market.