(00:03) [Music] Welcome to the Dearwood Realty YouTube channel. I'm John Schink, founder and managing broker of Dearwood Realty in St. Louis, Missouri. Houses are expensive right now, and I've lost lots of buyers lately. I don't have many sellers, so it's not going really well for me, and I'm quite positive that's the way it is pretty much throughout the country. Some people are cheering on a recession so that house prices would go down. Taking a different approach today, I saw an article on CNBC and wanted to go over it with you about what's going on basically. Let's get to it. It says, "But will it take to make homes affordable again for millions of Americans?" As mortgage rates reached a 23-year high last week, the cry went off across the markets and social media: Is housing affordability dead? Has a version of The American Dream – homeownership, kids, backyard barbecues – died with it? I don't think so. I think we're in a bad spot in the market. There are times when houses are expensive and times when houses are relatively inexpensive. To me, if you spend more than $100,000 for a house, it seems expensive. Houses are really expensive. In St. Louis, the average price of a decent home right now is probably around $350,000. First-time home buyers tell me their budget is maybe $150,000, and they're disappointed with the houses available at that price.

(02:17) The median family was already $9,000 short in August of the income needed to buy a median existing home, according to the National Association of Realtors. The recent surge in rates has moved another 5 million US families below the qualification standard for a $400,000 loan, according to John Burns Real Estate Consulting. At 3% mortgage rates, 50 million households could get a loan that size; now it's 22 million. Affordability depends on three big numbers, according to Yun, the chief economist: family income, the price of the house, and the mortgage rates. With incomes rising since 2019, the bigger issue is interest rates. Incomes have climbed 16% to more than $98,000 since 2020, but that isn't nearly enough to cover the affordability gap. Not enough new housing in America is another issue. The biggest reason that so few homes are up for sale is that the laws of supply and demand aren't working normally. Even with demand hit by affordability woes, buyers who are out there have to compete for so few homes that prices have stayed close to pandemic boom levels. Boomers are aging in place, and Gen X has locked in 3% mortgages already, so it's up to the builders. Housing policy in the United States is pretty messed up. Why is a corporation that can have millions of dollars behind it competing with a family of wage earners? It just doesn't make any sense.

(04:36) The builders are kind of a problem, said Redfin economist Daryl Fairweather. They've been boosting profits this year, tracking the industry up 41%, but they've barely begun to address the long-term housing shortage. Freddie Mac estimated 3.8 million homes before the pandemic, a number that has likely grown since. Builders have begun to work on only 692,000 new single-family homes this year and 1.1 million including condos and apartments. It'll take nearly four years to build enough houses to rebuild supply, and that leaves out new household formation. Meanwhile, apartment construction is already beginning to slow, and some builders, though not all, are pulling back on mortgage buydowns and other tactics they've used to prop up demand.

(05:47) There's a reason to believe more buyers could materialize. The millennial generation is just moving into peak home-buying years, promising to add millions of potential buyers to the market. If rates do begin to decline, that will bring more buyers back to the market but inevitably push prices back up towards previous peaks. The fed and bond markets are big problems. The biggest reason mortgage rates have soared lately is the bond market, which pushed 10-year treasury yields up by as much as 47%. The traditional spread between the 10-year treasuries and mortgages had widened to more than three percentage points. Few economists or traders expect the fed to push rates lower to help housing. To get affordability back to a comfortable range, it will take a combination of higher wages, lower interest rates, and stable prices, economists say. That combination may take until 2026 or later to coalesce. The market is in a deep freeze.

(07:01) Affordability became stretched partly because home prices rose 38% since 2020. Higher wages are a plus but not enough. Rising incomes will help, but family incomes have climbed 16% to more than $98,000 since 2020, but that isn't nearly enough to cover the affordability gap. Not enough new housing in America is another issue. The biggest reason that so few homes are up for sale is that the laws of supply and demand aren't working normally. Even with demand hit by affordability woes, buyers who are out there have to compete for so few homes that prices have stayed close to pandemic boom levels. Boomers are aging in place, and Gen X has locked in 3% mortgages already, so it's up to the builders. Housing policy in the United States is pretty messed up. Why is a corporation that can have millions of dollars behind it competing with a family of wage earners? It just doesn't make any sense.

(08:15) The builders are kind of a problem, said Redfin economist Daryl Fairweather. They've been boosting profits this year, tracking the industry up 41%, but they've barely begun to address the long-term housing shortage. Freddie Mac estimated 3.8 million homes before the pandemic, a number that has likely grown since. Builders have begun to work on only 692,000 new single-family homes this year and 1.1 million including condos and apartments. It'll take nearly four years to build enough houses to rebuild supply, and that leaves out new household formation. Meanwhile, apartment construction is already beginning to slow, and some builders, though not all, are pulling back on mortgage buydowns and other tactics they've used to prop up demand.

(09:15) There's a reason to believe more buyers could materialize. The millennial generation is just moving into peak home-buying years, promising to add millions of potential buyers to the market. If rates do begin to decline, that will bring more buyers back to the market but inevitably push prices back up towards previous peaks. The fed and bond markets are big problems. The biggest reason mortgage rates have soared lately is the bond market, which pushed 10-year treasury yields up by as much as 47%. The traditional spread between the 10-year treasuries and mortgages had widened to more than three percentage points. Few economists or traders expect the fed to push rates lower to help housing. To get affordability back to a comfortable range, it will take a combination of higher wages, lower interest rates, and stable prices, economists say. That combination may take until 2026 or later to coalesce. The market is in a deep freeze.

(10:40) Affordability became stretched partly because home prices rose 38% since 2020. Higher wages are a plus but not enough. Rising incomes will help, but family incomes have climbed 16% to more than $98,000 since 2020, but that isn't nearly enough to cover the affordability gap. Not enough new housing in America is another issue. The biggest reason that so few homes are up for sale is that the laws of supply and demand aren't working normally. Even with demand hit by affordability woes, buyers who are out there have to compete for so few homes that prices have stayed close to pandemic boom levels. Boomers are aging in place, and Gen X has locked in 3% mortgages already, so it's up to the builders. Housing policy in the United States is pretty messed up. Why is a corporation that can have millions of dollars behind it competing with a family of wage earners? It just doesn't make any sense.

(11:55) The builders are kind of a problem, said Redfin economist Daryl Fairweather. They've been boosting profits this year, tracking the industry up 41%, but they've barely begun to address the long-term housing shortage. Freddie Mac estimated 3.8 million homes before the pandemic, a number that has likely grown since. Builders have begun to work on only 692,000 new single-family homes this year and 1.1 million including condos and apartments. It'll take nearly four years to build enough houses to rebuild supply, and that leaves out new household formation. Meanwhile, apartment construction is already beginning to slow, and some builders, though not all, are pulling back on mortgage buydowns and other tactics they've used to prop up demand.

(12:55) There's a reason to believe more buyers could materialize. The millennial generation is just moving into peak home-buying years, promising to add millions of potential buyers to the market. If rates do begin to decline, that will bring more buyers back to the market but inevitably push prices back up towards previous peaks. The fed and bond markets are big problems. The biggest reason mortgage rates have soared lately is the bond market, which pushed 10-year treasury yields up by as much as 47%. The traditional spread between the 10-year treasuries and mortgages had widened to more than three percentage points. Few economists or traders expect the fed to push rates lower to help housing. To get affordability back to a comfortable range, it will take a combination of higher wages, lower interest rates, and stable prices, economists say. That combination may take until 2026 or later to coalesce. The market is in a deep freeze.

(14:00) Affordability became stretched partly because home prices rose 38% since 2020. Higher wages are a plus but not enough. Rising incomes will help, but family incomes have climbed 16% to more than $98,000 since 2020, but that isn't nearly enough to cover the affordability gap. Not enough new housing in America is another issue. The biggest reason that so few homes are up for sale is that the laws of supply and demand aren't working normally. Even with demand hit by affordability woes, buyers who are out there have to compete for so few homes that prices have stayed close to pandemic boom levels. Boomers are aging in place, and Gen X has locked in 3% mortgages already, so it's up to the builders. Housing policy in the United States is pretty messed up. Why is a corporation that can have millions of dollars behind it competing with a family of wage earners? It just doesn't make any sense.

(15:25) The builders are kind of a problem, said Redfin economist Daryl Fairweather. They've been boosting profits this year, tracking the industry up 41%, but they've barely begun to address the long-term housing shortage. Freddie Mac estimated 3.8 million homes before the pandemic, a number that has likely grown since. Builders have begun to work on only 692,000 new single-family homes this year and 1.1 million including condos and apartments. It'll take nearly four years to build enough houses to rebuild supply, and that leaves out new household formation. Meanwhile, apartment construction is already beginning to slow, and some builders, though not all, are pulling back on mortgage buydowns and other tactics they've used to prop up demand.

(16:25) Thank you for watching, thank you for listening, and I'll catch you on the next one.