What goes up must come down, or at least stop going up so fast. But that old adage doesn’t mean our housing market problems will soon be in the past.
After surging upward for two years, home prices are beginning to moderate. Mortgage rates have risen and bidding wars are receding. Listed homes are lingering on the market longer than before.
Still, there are limits to these changes. Prices are still rising, just not as fast: Price growth for the week ending July 30 was a percentage point lower than the two previous weeks, according to Realtor.com, but prices were still 15.6% higher than a year earlier. It was the 33rd straight week of double-digit year-over-year growth.
More ominously, new listings fell for a fourth consecutive week, this time by 8%. Homeowners looking to cash in on the sizzling market have noticed there’s less sizzle than before. Although slower home sales mean the number of homes on the market has increased, that trend isn’t expected to last. And it may simply signal that those homes that are hanging around on the market are less desirable.
What does all this mean for housing affordability? It means the basic problem remains the same: We need more supply.
Estimates put the national housing shortfall at almost 4 million units. The shortage in Georgia alone likely reaches into the hundreds of thousands, in large part because we’ve been building fewer new homes over the past decade than we did in previous decades when the state’s population was significantly smaller.
As long as those facts remain, upward or downward pricing trends within the existing-home market will not lead to the meaningful change in affordability that people want and need.
On this front, the news is not great. The latest federal data show the number of building permits issued nationwide in June was slightly higher than a year earlier, but lower than in nine of the past 10 months.
The number of new housing starts in June was lower than a year earlier.
What will it take to jump-start new construction?
There’s no silver bullet, but elected officials could start by not making it harder and more expensive to build homes.
Earlier this year, the Georgia Public Policy Foundation published a study finding that government regulations account for almost 27% of the price of a new single-family home. That’s higher than the national average of almost 24%, and it represents a continual ratcheting up of that cost. For example, the largest single culprit for this excessive burden was compliance with changes to the building code over the past 10 years, not all of which were necessary to protect health and safety.
More recently, our investigative reporter examined the case of Oconee County. The median home price there is roughly 50% higher than the statewide average. That in part reflects the desirability of living in that county, including its highly regarded school system. But industry experts say it also reflects decisions by the county commission to mandate certain building requirements, such as using foundations with crawl spaces rather than slab foundations in many cases. That alone is estimated to add tens of thousands of dollars to the cost of building a home.
There are examples like that all across the state, and my colleagues and I will be pointing out as many of them as we can over the next several months.
It’s important to emphasize that, at a time when our trust in government to solve problems is perhaps lower than ever – and not without reason – this is a problem government can solve.
The same governments that create those regulatory burdens can ease them. The same governments that run inefficient permitting processes can make them more efficient – or allow builders to use private third parties that are more efficient.
But to do that, our lawmakers will have to stay focused on those mundane but essential tasks – and not wowed or distracted by rising or falling prices.
