The Housing "Affordability Crisis" Is Fake News

One of the regular "topics" in the real estate news industry is the "housing affordability crisis." The news sources cry that home prices are "too high" for most buyers to afford. Why do they do this, and what is the truth?

Let's start with a check on the current market.

The two most important factors to check are always the mortgage rates and the inventory levels, and both have remained in a narrow bandwidth.

Inventory: homes for sale remain at the lowest ever other than during the pandemic period, nearly half of the normal historic levels.

An interesting note is that the off-market portion of the industry has continued at historic HIGH levels, indicating that buyers and sellers are frustrated by an inefficient market and looking for ways to finalize transactions that the market cannot.

Another indicator of the intense interest in the market is that 41% of sales are under contract within 2 weeks, continuing the pandemic period intensity.

Locally, the same is true, with inventory levels ONLY seen during the pandemic.

Altos Research still rates Los Angeles as a  seller's market, with a rating of 39. they confirm that inventory levels remain low and sales price per square foot still increasing at a steady rate.

 The screaming headlines about market crashes have subsided, and are, appropriately limited to a few markets that were red hot last year and are now experiencing corrections. Nationally, even those sources predicting a drop in prices note that at best it's a small correction over the past few years' trendlines. Goldman Sachs, for example, is predicting a 6% fall in prices starting in June through the 1st quarter of this year, but when you plot it on a graph, it seems at best a minor correction when put in perspective.

If you follow me, you know one of my theses is that real estate industry news is as fake news as political news. This week's winner/loser is Marketwatch, which continues the fake issue of housing affordability with the headline:

So, what does "housing is affordable again" mean? And in the article, they claim that "homes are still far from affordable."

What does that mean?

Over 4 million homes were sold in 2022. By comparison, 36.2 million cars were sold in the US in 2022, including new and used cars. That would include some families having 2 and 3 cars, and includes companies that have fleet sales. No one says cars are not affordable, yet about 1 in 9 car buyers can afford a house. By what standard does one say that ONLY 4 million sales a year make homes unaffordable? Certainly NOT for those 4 million that bought homes. And, of course, there are only so many homes, so making more sales would require more sellers to sell, which ultimately is going to require more new homes built. Yet, so much of our political system is preventing homes from being built. So, rather than have an honest discussion over whether or not we should devote more space and natural resources to building more homes, it is easier to get non-homeowners upset by saying homes are not affordable. Of course, they are affordable, at the price they are for sale to shoe who want to pay it.
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Bill Gross, The LAProbate Expert
I am a real estate broker in Los Angeles, CA focused on probate real estate and the leader of a team of over 1,100 agents national probate experts.

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