Consider This from NPR - The Housing Market Is Wild Right Now — And It's Making Inequality Worse

Episode Date: April 6, 2021

Home prices are soaring around the U.S. Amid low inventory and historically low interest rates, some buyers are hitting the market to find they can't compete with all-cash offers, or bidding wars that escalate well out of their price range. Sean Hawksford in Bozeman, Mont., is one of those buyers. He told his story to NPR's daily economic podcast, The Indicator. NPR's Chris Arnold explains why the market is so wild right now. And while homebuying is a big financial decision, it's also an emotional one. Those emotions are on full display in a new Netflix show called Marriage or Mortgage. Michelle Singletary, a personal finance columnist for The Washington Post explores what the show reveals about the homebuying process, and why — in more ways than one — it's not for everyone. Here's her recent column about the show.In participating regions, you'll also hear from local journalists about what's happening in your community.Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Sean Hawksford and his wife have a kid on the way. So they've been looking for their first home in Bozeman, Montana. Sean's got a good job. His wife works as well. They found a house they loved that they could afford for $425,000. We said, all right, it feels like a huge step, but we'll make the offer. We'll do it. We'll commit to making the offer.

They really wanted the place. So they offered $10,000 more above asking. But the owners said, hey, sorry, we've got offers even higher. So Sean and his wife dug deep. They went from $435 to $450. They responded and said, I'm sorry, we've accepted someone else's offer. Apparently, they were beaten by an all-cash offer. And then we did that 17 more times. That's 18 offers. 18 houses. And yeah, we've been turned down on all 18. Sean told his story to NPR's daily economics podcast, The Indicator.

The team over there heard about him because Sean had become something of a celebrity in Bozeman. You might have seen him around Main Street in Bozeman with a cardboard sign, a local business owner begging people to sell him a home. Yeah, after all those rejections, Sean started walking around town wearing a homemade sandwich board with a message written in black sharpie please sell me a home there's days when it feels like uh we're never gonna find a house consider this the housing market right now is wild we'll explain why and what all this has to do with a new reality show where couples choose a wedding or a mortgage you know you've been together for eight years. You got two kids. I'm sorry, that cake has been cut.

Let's just use this money to build your wealth. From NPR, I'm Adi Cornish. It's Tuesday, April 6th. Support for this podcast and the following message come from TrackPhone Wireless, giving you control over your wireless plan there's no contract and unlimited talk and text smartphone plans start at just 20 a month all in america's largest and most dependable networks learn more at trackphone.com

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All of that in around 20 minutes every weekday. Listen now to the Pop Culture Happy Hour podcast from NPR. It's Consider This from NPR. Part of the problem with the housing market right now is that almost everything costs more. Garage doors are up 11 percent. Insulation is up 25 percent. The lead time for windows has gone from three weeks to 16 weeks. Will Reuter runs the Home Builders Association of Greater Kansas City. The pandemic has both increased demand and limited supply for a lot of home building materials, especially lumber.

In a lot of places, lumber prices have doubled in the last year, adding tens of thousands of dollars to the cost of a new home. And Reuter says for every $1,000 price increase nationwide, more than 150,000 potential buyers are being priced out of the market. So when we're talking about $20,000 to $25,000 increases in lumber, extrapolate that to the number of families that are going to find themselves on the outside looking in from a new home construction standpoint. And we're just talking about new homes. There are not enough existing homes on the market to keep up with demand, what's known in real estate as low inventory. And all of this means home

prices are soaring, not just in New York or the Bay Area, in places like Memphis, Tucson, Greensboro, Camden. All those places have seen home prices rise nearly 20% during the pandemic. As for who's buying these homes, some of them are people who have saved up a lot in the last year. Some of them are investors. In fact, according to one estimate, in many places, roughly one in five homes is bought by someone who will never live there. Meanwhile, some people are buying homes right now because they're moving from bigger cities to smaller ones. You've just got so many people who come from LA to look at a house in Tucson. Glenn Kelman is the CEO of Redfin, an online

real estate brokerage. And they're walking through it with a real estate agent and say, so what do places go for around here? $800,000 or $900,000? And the average price in Tucson is more like $300,000. And the agent's eyes pop out of her head. So the folks who are leaving these coastal cities are totally blowing up these tiny towns. And they walk in with monopoly money and they get a house that's double the size they ever imagined they'd be living in. And it just distorts the whole economy. It's pretty intense right now, especially in areas where there's been job growth and a lot of people want to move there and live. And that's Chris Arnold. He covers personal finance for NPR.

We spoke about why the housing market's so wild right now. What about the pandemic? I mean, we were hearing about a precipice of evictions. Help us understand what part of the economy we're looking at. Well, I mean, all that is still true, right? There are nine and a half million people who can't pay their rent. But there is a much larger part of the economy where people have been working and a lot have been saving more than they ever have before. And there's a lot of people looking to buy houses. And there are just not enough homes for sale. That's also a huge part of this. And some of that, too, is related to the pandemic, people hunkering down. It's COVID. They're scared. Maybe they would have sold, but it's too much this year. A big issue, too, is as a country, we just have not been building enough new homes.

Why? I mean, if we've got this surge in demand and high prices, why wouldn't there be more homes being built? Good question. And so I talked to a guy who should know the answer, the chief economist for the National Association of Home Builders, Robert Dietz. And here's what he says. We have a deficit of probably about a million single-family homes nationwide.

It's a consequence due to the fact that coming in the years after the Great Recession, we have underbuilt. And I've sort of cited it to some underlying causes that we've called the five L's. Location, location, more locations? Different L's. These are totally different L's. Go on. I'm going to called the five L's. Location, location, more locations. Different L's. These are totally different L's. Go on.

I'm going to tell you the L's. Labor, lots, that's land, lending, lumber, and laws, like zoning laws. Which do you want to hear first? Can we talk about labor first? Yes. Labor, there's a good one. A lot of construction workers left the industry after the housing crash. So it's really hard to find workers to build houses. Land has been expensive. That's an

obstacle. Lending, for the companies that build homes, they've been having some trouble getting loans. Lumber is interesting, too. I mean, the prices are through the roof. The biggest thing, though, is really zoning laws, and that's plagued us for a long time. There's just so many rules that get in the way of building homes. You mean, NIMBY kind of not in my backyard type thing? Right, exactly. And Dietz says, if there's one thing that we could do to really improve the lives of Americans looking to become homeowners, it's allow for zoning where you can build smaller homes that are closer together so people can afford them. And, you know, four very boring words that have tremendous power in America are minimum

lot size zoning. You know, and what that means is if you require one acre of land to put one house on, it's going to cost a million dollars. You know, let people build smaller stuff that people can afford. NPR's Chris Arnold. Buying a home is a big financial decision. It's also, for better or worse, an emotional one. Case in point, a Netflix reality show called Marriage or Mortgage. Got a lot to talk about for sure.

Either way, it's life changing for us. All right, it works like this. Young couples with something like $35,000 to spend have to choose between a dream wedding or a dream home. You know, we've talked it over and... So in this episode, Raven and Antonio have two young kids and eight years together under their belt. And, spoiler alert, we have decided to go wedding. Congratulations.

Real talk, I'm obsessed. And so is Michelle Singletary, personal finance columnist for The Washington Post. You know, you've been together for eight years. You got two kids. I'm sorry, that cake has been cut. Let's just use this money to build your wealth. Now, to Michelle, marriage or mortgage is built on a false premise that a major financial decision like buying a house is somehow equivalent to a party, which is what it is. It's a party. Michelle wrote about this show recently, which to be fair, was filmed pre-pandemic, but it still reveals a lot about the emotions of home buying and why, especially right now, it's not for everyone in more ways than one.

What I was intrigued by the show, however, after watching it was the decision-making process that these couples are making. And I teach about this all the time. I teach financial literacy in my church. And one of the things I tell people all the time is you cannot make sound financial decisions based on your emotions. And this is what all those folks are doing. Oh, I dream of having a wedding since I was six, really six, six. You know, I got to have this this and I gotta have that. But I remember that couple, they felt as though they were entitled to it. And I don't mean that in a mean way, but that they'd been together for a long time, and they had not gotten to have this moment. And this is where

I guess behavioral economics comes in, right? The idea of like how the decision-making process that isn't always financial. That's right. In its logic. And I want to just tell you, I am not of the ilk that thinks that home ownership is an automatic guaranteed wealth builder. We saw in the Great Recession how that is not always the case.

But where it goes off for me in the decision-making process is looking at your finances long-term. And this is what I always tell people. If you have no debt and you're saving towards your retirement, if you've got kids, you're saving for their college fund, you have an emergency fund, and then you've got an extra $35,000, you could do whatever you want with that money. You don't need my advice. But if you can't tick off all those boxes, for me, that is reckless. It's financially reckless. But as you were watching the show, did you think to yourself, what does this say about

people's attitudes towards homeownership? And what conclusions did you come to about that? I do think that we do have, because a lot of the couples are younger, they do sort of have this attitude, well, you know, my parents plopped all their money in the house and they felt like that was what they should do. I don't have to follow that path. I actually don't have a problem with that way of thinking because people just don't realize how much of their income they're obligating to that mortgage. And I know people want to jump on the low interest rates and I get that, but you cannot jump into a house before you're ready for it. It will create all kinds of economic chaos in your life. There are other ways to build equity for yourself and wealth, retirement savings, not having debt. So you're saving to send your kids to college or you're paying off your debt. Those are all ways to

secure yourself financially that's not tied to owning a home. At the same time, there's wage stagnation, right? That's a barrier to owning a home. Are you seeing a market that is going to cause further long-term inequality? Yes, absolutely. I mean, there was already, we are a country of have-been, have-nots. And if you're in a minority, oh my gosh, or low income, you're just shut out of so many things. And so this race to buy houses at any cost makes it unaffordable for many families. And since we know that wealth building is tied to owning a home, that shuts out a lot of people who are already having trouble making ends meet. Michelle Singletary is a personal finance columnist for The Washington Post.

We'll link to her column about marriage or mortgage in our episode notes. You also heard reporting in this episode on the cost of lumber and home construction from Frank Morris of member station KCUR in Kansas City, where home prices are up 12% since last year, according to Redfin. And by the way, since he first spoke to NPR, Sean Hawksford in Bozeman, Montana, did find a house. Someone in town saw his homemade sign and sold him one. They said they really wanted to sell to a local family. Thanks to our friends at the Indicator for Sean's story. It's Consider This from NPR. I'm Adi Cornish.