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From mortgage delinquencies and evictions to home prices and rental rates that are too high, the United States housing marketing is troubled in a number of ways that could have both short-term and long-term impacts on the housing market and the economy at large. According to the Pacific Legal Foundation, a renewed focus on property rights could help solve some of these problems.
According to the U.S. Department of Housing and Urban Development’s July 2020 Neighborhood Watch report, 17% of the country’s 8 million insured mortgages are now delinquent. The rate is higher in some cities, New York City with 27.2%, Miami with 24.4%, and Atlanta with 21%. These numbers do not represent the millions of sub-prime mortgages that led to the 2008 housing crisis, which means the picture today might be even grimmer than it was a decade ago.
At the other end of the spectrum, new home sales reached a fever pitch in 2020, with new contract signings up more than 20% over 2019, according to Housingwire. This surge in demand increased market competitiveness and drove prices higher, making homes tougher for first-time buyers and those in lower-income brackets to access.
“Realtors cited a combination of high demand and low inventory, which are making conditions more competitive and exerting upward pressure on prices. The faster price growth is leading to affordability challenges for certain segments of buyers, and particularly for first-time homebuyers,” Joel Kan of the Mortgage Bankers Association told Housingwire.
The surge of new homebuying can’t go on forever. Eventually, the country will run out of houses that are available to buy. The National Association of Realtors estimates that the U.S. currently has enough available homes to meet the current demand for about 2.5 months, an all-time low supply.
The surge in demand means that many, many more new homes need to be built, particularly those suitable for first-time and low-income buyers. Otherwise, prices will continue to rise, and these groups will be pushed even further out of the housing market.
“Homebuilders’ confidence has soared even though the actual production has not,” said Lawrence Yun, chief economist for the National Association of Realtors. “All measures, such as reduction to lumber tariffs and expansion of vocational training, need to be considered to significantly boost supply and construct new housing.”
James Burling, vice president of legal affairs at the Pacific Legal Foundation, argues that unnecessary government regulations exacerbate these problems by slowing down new construction with litigation and regulatory reviews. In addition to damaging the industry, these regulations impede on the property rights of individual owners.
“The housing shortages are caused by the roadblocks thrown up to stop building, and these roadblocks would not be nearly as severe if government agencies and the courts had more respect for property rights,” Burling wrote. “Because we’ve failed to meet the demand for housing, the cost of housing is unaffordable for more and more Americans. People must double up and spend more for less. An increasing percentage of families pay more than half of their income on housing.”
The solution to this problem, Burling says, is for courts across the country to be more proactive in defending the rights of property owners against excessive regulation that slows down new construction.
“The courts must be more assertive in ruling on behalf of the rights of property owners when people go to court to defend their right to build homes,” Burling wrote. “That’s the critical first step on the road to addressing the housing shortage, both in California and nationwide.”
It seems these actions can’t come quickly enough. Zillow predicts that new home sales will grow even more in 2021, estimating 6.9 million new home sales — the most since 2005 and the biggest one-year increase since 1983.
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