John: In 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, too,
causing overall housing
affordability to collapse at its
fastest rate on record.
Roben farzad is host of public
radio's "Full disclosure."
Roben, thanks for joining us.
What's going on here?
What's driving this?
Roben: So many peculiar, perfect
storms coming out of this great
pandemic of 2020.
Could anybody have romanced how
much we'd have this renaissance
in interest in staying at home,
work from home, people who are
on the fence about selling their
homes or aging out of their
homes suddenly not just start
adding to their homes right now,
but are buying homes in
satellite markets.
Parallel to that, you had
interest rates taken down to
really attractive levels and
people could get a 3% 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.
And that's caused a tremendous
kind of sluicing of hot money
into these markets where you
just never had the inventory.
John: 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 does that work?
Roben: There's a shortage of
affordable housing.
If you were thinking that I'm
going to 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 are
-- 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 onto
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: Is anyone benefiting from
this?
Roben: Investors, Wall Street.
I mean, those who are able to
show up with cash.
You see these these signs
outside of homes, there are
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: You 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: 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,
forgoing 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 razed 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: You talked about policy
solutions.
What can be done to address
this?
Roben: 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 swaths of
Washington, D.C., 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 rip 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, go in on a Monday
morning, it's still a bit of a
ghost town, but there is 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 cored out.
Which kinds of forces are going
to intervene to kind of convert
that to the housing that's
desperately needed?
John: Roben farzad of public
radio's "Full disclosure."
Thank you very much.
Roben: My pleasure.
Thank you.