The present housing situation – or “crisis,” as some have called it – in the U.S. may be serious, may look frozen, but still isn’t as bad as things were in 2006, prior to the Great Recession.
So surmises Daryl Fairweather, chief economist at real estate brokerage Redfin, in an interview with NMP. “People are feeling the costs of living in a lot of different ways, and housing is a big portion of people's budgets,” she said.
“Ideally, it’s a third of people's budgets or less," Fairweather continued, "but we're seeing that number get higher and higher for renters and homeowners. The cost burden has been growing,” underscoring the affordability problem.
In a report issued yesterday, Redfin found that a majority of people – single, married, or separated/divorced – report they are struggling, at least sometimes, to make mortgage and rent payments.
“The situation isn't so dire that people are missing mortgage payments and entering into foreclosure,” she added. “It's not like it was back in 2006.”
Costs are up, as the Federal Reserve has noted, and the higher costs of goods is affecting households nationwide. “The inflation that happened in 2021, 2022, 2023 impacted a lot of things that impact housing costs,” Fairweather said. “So insurance costs, maintenance costs, property taxes, HOA fees – they all go up when inflation goes up.”
Yet, in that same Redfin report, the vast majority of people were on time with their mortgage payments and rent payments, despite some hardship. Only about 5% overall were late with mortgage payments, though more than that, about 13% overall, were late with rent payments.
What’s needed to right the ship? “We have to increase the supply of homes in order to get home prices under control, though that's more for new home buyers. If you're an existing homeowner, what you would most want is for your incomes to grow faster than your cost of living and your cost of homeownership,” Fairweather said.
Meanwhile, Redfin also reported on a national home inventory pileup, as buyers have been sitting on the fence. For them, it’ll likely take more than just inventory increases to solve the present housing situation.
According to Redfin’s data, the five-month backlog of housing inventory is up from 4.4 months a year earlier, reaching the highest level of inventory in six years, except the prior four week period.
Nationwide, 17.2% of U.S. homeowners with mortgages have an interest rate greater than or equal to 6%, the highest share since 2016, Redfin reported. Rates are playing a big role in the housing situation.
“Anybody who bought a home in 2022 to present was probably hoping that mortgage rates would come down, and they have not come down,” said Fairweather. “So I think for those people, maybe they were already stretching themselves to buy a home. They bought when home values were already high, and in some places, home values peaked in 2022 and then stayed flat.”
