Home Affordability - The Issues
- davidcogd
- Aug 26, 2024
- 2 min read
Home Affordability is a major issue. Both Parties have plans to address the issue.
What is the extent of the crises, and what are the details of policy from Harris and Trump ?
The following chart reveals the extent of the problem. The average monthly mortgage payment is up 43% since 2000 and up 83% since 2020 !! The numbers are real increases, leaving out the effects of dollar inflation.
The reasons for this radical increase are simple:
Basic Economic Law of Supply and Demand. There is a shortage of supply of used housing on the market. A shortage causes prices to increase. The shortage exists because homeowners who bought or refinanced before 2021 have no wish to give up the record low interest rates they have locked in. So, used homes are not going on the market.
General increase in material costs for new housing brought by record inflation starting in 2021. This inflation was caused by excessive Federal Spending and much higher energy costs.
Federal Reserve Interest Rates were raised to combat the inflation issue. From 2020 to Today the Fed Reserve Rate increased from 0.25% to 5.0%. Mortgage Rates followed by more than doubling.
What are the Presidential candidate’s plans to for Home Affordability:
Donald Trump – Basic Economics.
General policy that reduces Inflation primarily by lowering Energy Costs and controlling Federal Spending.
Low inflation will lead to lower interest rates with significantly lower mortgage payments for homes.
Reduce government regulations that hinder the construction of new homes. This would increase Supply on the market.
Kamala Harris – A More Complicated Policy.
Tax incentives for developers building homes for first-time Buyers. Why should the Federal Government give tax breaks to companies that are failing in their mission. The taxpayers are on the hook for this cost.
First-Time Homebuyer Assistance. A tax credit of $25,000. This incentive could have the unintended effect of driving up home prices by an artificial increase in demand due to government subsidy.
A form of National Rent Control. This approach has been tried by individual Cities for many years with nothing but negative consequences. Control of prices by a government bureaucracy creates distortion in markets, the exit of building investors, and poor maintenance & services. Ultimately results in less availability of housing and poor quality in controlled market areas.
Cogport views government policies that favor targeted groups as fundamentally unfair, and a detriment to the Free Market System which employs the creations and investment of private citizens for Economic Growth.
No Government Bureaucrat can duplicate the wisdom of millions of people and companies making individual decisions in a Free Market.
David Hollaender August 26, 2024
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