Housing Crisis in America
As an American we were raised on the idea that it does not matter where you come from, anyone can rise to greatness. But in today’s economy, inflation is pricing out the lower-class making home ownership more unaffordable too the average man. Interested? read more to read how and why this is happening.
America was built on the idea that everyone is equal in opportunity, from the ordinary worker to the rich. However, in today’s America, that might not be the case. For starters, owning your own home is the primary way to gain financial independence; even though we are all equal in the eyes of the law, in recent years, home ownership is becoming more unobtainable for the lower classes. Although there are numerous reasons, one of the main reasons today is caused by inflation in the American housing market.
In today’s market, the average American home is sold for half a million dollars as of the first quarter of 2022, nearly doubling the average of 15 years ago. However, the number of homes purchased yearly has declined by 2 million, reaching a low of 5.64 million national sales. Naturally, the average cost can shift between states, so is this national statistic relevant to you? On https://fred.stlouisfed.org/series/ASPS, they show that in the south, the average home is sold for $451,000 in the first quarter of 2022, just barely behind the national average.
Moving on, I’m sure many Americans are aware of the crisis inflation is causing, but do we know why, or how this all began? By looking back to the beginning, we can see where this rapid growth started. The fact is, inflation has been a problem since the start of COVID, and one of the main results is increasing mortgage rates. So in recent years, the Federal Reserve increased prime interest rates to combat this inflation; however, in doing so, it forced banks to increase their own interest rates, driving up the housing market. Meanwhile, the housing market has become more limited due to supply chain issues causing a higher demand. As a result, with homes becoming scarcer, investors buy up the properties, driving up the price. Usually, this is fine, but due to various other factors, the cost of homes has exceeded the average wage growth making homes more unaffordable.
On the other hand, despite wage growth being at an all-time high, housing is still impossible for your average working man; why? Because of the global pandemic, the cost of living has increased drastically; on top of that, many businesses aren’t making enough to pay their increased costs, so they are forced to raise prices to stay afloat. With interest rates doubling by the month and wages struggling to keep up, the gap between the two continues to widen.
Moving on, now that you know how this started, what attempts are being made to stop it? Surprisingly the answer is nothing. At this moment, the Federal Reserve is faced with two choices, either A, they let inflation run wild, ruining our economy indefinitely, or B, they continue to increase the prime rate slowing the inflation while also putting a strain on the lower classes.
In conclusion, the issue mainly boils down to the federal reserve choosing the lesser of two evils. Even though things may be rough now, this is a short-term issue, and we as a country can persevere through these troubling times.
