Skyrocketing home prices and rents create housing crisis

Read the Full Transcript

• John Yang:

  And today's highly competitive housing market millions of Americans are priced out of buying a home, often competing with all cash offers well above asking prices and rents are skyrocketing to causing overall housing affordability to collapse at its fastest rate on record. Roben Farzad is host a public radio's Full Disclosure. Roben, thanks for joining us. What's going on here? What's driving this?

  Roben Farzad, Host, "Full Disclosure": So many peculiar perfect storms coming out of this great pandemic of 2020. Could anybody have romanced how much we'd have this this renaissance and interest in staying at home, work from home, people who are on the fence about selling their homes are aging out of their homes suddenly not just are adding to their homes right now, but are buying homes and satellite markets parallel to that you had, interest rates taken down to really attractive levels and people could get a 3 percent mortgage.

  And in a broader sense, the mobility of the workforce the great unlock of going from high priced markets in New York and California to places like Miami or Asheville, North Carolina and Austin, that's caused a tremendous kind of sluicing of hot money into these markets where you just never had the inventory.

• John Yang:

  And interest rates. You mentioned, interest rates are low, they're creeping up, but they're still at historic lows, mortgage applications at a 22-year low now, but at the same time, rents are skyrocketing. How what — how does that work?

• Roben Farzad:

  There's a shortage of affordable housing. If you were thinking I'm at a husband cash and save for years and a starter home or starter rental type thing in order to — if you had a price in mind, suddenly that price, in many cases was blown out of the water because mortgage rates were so low, because you had such a piping hot housing market.

  And John on top of that, homebuilders did the rational thing and pulled back drastically after the great financial crisis. We thought that that was going to be a generational overhang. And so now we're paying for the decisions that were kind of made in the fog of 2009 and 2010.

  Millennials have come to the market. They see boomers hanging on to inventory longer. And so you have a generation of people that are locked out of affordable housing and have no choice but to pay rent and pay ever more rent.

• John Yang:

  Is anyone benefiting from this?

• Roben Farzad:

  Investors, Wall Street, I mean, those who are able to show up with cash. You see these signs outside of homes, they're people that come in and buy them and they'll buy your homes and turn them around and sell them into the institutional market. We've seen small flippers hard money loan lenders. We've seen the largest of buyout firms and private equity firms involved because this is a generational megatrend.

• John Yang:

  You've talked about how the inventory dropped because builders stopped building after the real estate bust. Is there likely to be a sort of a pendulum shift in this will they start building again?

• Roben Farzad:

  When you see things happen, such as people showing up even at the whisper of a home being listed, to be able to put in enormous preemptive bids for going a home inspection. Of course, housing developers are going to enter the fray.

  I have a dead mall near my house here in Richmond, Virginia and the sears was raised and you have luxury condominiums and apartments put there that's cold comfort for people who need affordable housing, but it shows you that the market wants to meet a demand.

  You do need policy solutions to make sure that people aren't kind of doomed to becoming a generation of kind of usurious renters. Some of these rents have gone up in such chunky terms. You look at markets like Los Angeles, where there's a concurrent homelessness problem, Manhattan, Miami, where it's just become arguably one of the most unaffordable markets in the United States, largely because out of towners have come in with hot New York and California dollars. And there's really nothing that locals with their pay scales can do.

• John Yang:

  Talks about policy solutions, what can be done to address this?

• Roben Farzad:

  You know, I mentioned a great unlock earlier. We have concurrent to this parallel to this huge overhang about hybrid work and a return to work. I can go to the canyons of midtown Manhattan. We can go to whole swathes of Washington, DC, Miami, Los Angeles, Hartford, Connecticut, and very scarcely used commercial real estate property.

  And the question is, to what extent is there going to be a public private partnership to come in and refurbish these things, the risers kind of ripped them out actually put in bathrooms, and somewhat affordable housing for people because the opportunity cost of all of that.

  I mean, millions and millions and millions of square feet, if you think about Midtown Manhattan, going on a Monday morning, it's still a bit of a ghost town, but there's a desperate need for housing and you're going to have to see that in parallel in other markets where the commercial epicenters have been caught out, which kinds of forces are going to intervene to kind of convert that to the housing that's desperately needed.

• John Yang:

  Roben Farzad of Public Radio's Full Disclosure. Thank you very much.

• Roben Farzad:

  My pleasure, thank you.