Homeownership Rates and Affordability Issues

Time for some uncomfortable discussions about #housingaffordability. In 1950 a single income family could buy a brand new home for 2x their annual wage. In Wisconsin in 2023 it is 8x the median wage. An average new home is at least $575,000 and the median wage is $72,458. That median wage includes 2 earners in the household. See why young families are falling behind? For too long we have ignored the issue and it needs to be addressed. We are all to blame. Here is a list of issues we must begin to tackle if we ever want to solve this problem. 1. Cost of regulation- Local, state, and federal regulations add $93,870 to the cost of a new home. There is no such thing as an affordable home when the government puts this much burden on a household before you have even taken a shovel to a project. 2. Land use- Reliance on old standards from the 1950's do not serve the needs of housing today. We no longer build in square grids, on flat lots, and next to schools. Complicated land with terrain, trees, wetlands must be treated differently. 3. NIMBYism- Allowing neighbors to dictate land use adjacent to them has been dangerous and does not serve the needs of the community. 4. Impact fees- These municipal fees have run amok. Many areas have over $10,000 in one time fees for the opportunity to build a home. Some municipalities have utilized the funds according to state law. 5. Energy standards- The war on natural gas as well as ridiculous efficiency standards are driving up costs and don't provide reasonable paybacks. (Less than 10 years is a reasonable payback) 6. Unreasonable minimums- In order to build less expensive homes we need to build smaller. Smaller lots, smaller homes. How do we do that when the local municipality dictates 1900 sq. ft. as a minimum? 7. Delays- Long platting processes, development approval processes, public hearings all add time, and time costs money. Delays in the development process alone cost $1442 per site. 8. Overbuilding- This ones on the builders. We tend to over build and pack homes with features because that's what buyers want. Could we build homes with laminate tops, hollow doors, and vinyl floors. Yes, but will buyers buy them? 9. Finances- The finances of development are messed up. The amount of capital needed to pull of a project takes out many developers. Buy the land, pay for the improvements, bond or finance 1.2 times the improvement amount with the municipality, plus holding cost of the land for 1-2 years while it goes through approval process means you have tied up millions in capital. 10. Interest rates- Higher rates hurt buyers, builders, and developers. Builders are carrying less inventory. A home that cost a buyer $1,361 in 2020 now pays $2,857 today. Developers are platting less land due to high holding costs. We can no longer sit back and just play defense. Simply fighting off new regulations is not enough. It's time to go on offense, think outside the box & make real change.

According to a new Redfin study, over 20% of Gen Z and millennials who recently bought a home got financial help from family for their down payment, and 18.2% of young renters aren’t buying because they can’t afford a down payment. These stats immediately resonated with me. Back in 2004, I bought my first home thanks to my grandfather. He took a cash-out refi on an investment property to help me with my down payment. I was incredibly fortunate, not just that he wanted to help, but that he could afford the increased payment that came with higher loan balance. Fast forward to 2025, and things look very different. Interest rates are high. Inflation is stretching household budgets. The option my grandfather used isn't feasible for many families today. But that doesn’t mean the opportunity to help the next generation is gone, it just might look different. Are we overlooking a better option? With over $10.6 trillion in untapped home equity held by older Americans, there’s a powerful and underutilized tool available: reverse mortgages and reverse mortgage (no payment) home equity loans. These allow people 55+ to access home equity without taking on new monthly payments, while potentially gifting part of that equity forward, as an early inheritance, to help children or grandchildren buy their first home. What impact could this have? >Helping younger generations avoid dipping into retirement accounts too early. >Getting them into a home early - the asset most likely to build long-term wealth. >No impact to the cash flow of the person offering help. >Aligning generational wealth transfer with the timing that matters most. The older generation maintains ownership, preserves their retirement lifestyle, and gives financial help when it’s needed most, not decades later. Could this be part of the solution to unlock a path to homeownership for the next generation? With prices at record highs and down payments averaging $63k, the barriers are steeper than ever for younger Americans. But what if the solution to this affordability crisis is already sitting in the homes of older generations, who hold on average over $200k in tappable equity? Why does timing matter in wealth transfer? With people living longer than ever, traditional inheritances may not arrive until heirs are already nearing retirement themselves. By contrast, helping younger family members buy a home now aligns wealth transfer with life’s inflection points - marriage, children, relocation - and could help close the intergenerational wealth gap exacerbated by today’s housing costs. Imagine the ripple effect if even a fraction of the eligible homeowners who haven’t tapped their home equity considered this option. How many more of the 18% of Gen Z and millennial renters currently sidelined by affordability could become owners? Is it time to rethink what financial support looks like across generations?

Homes are not affordable. We all know this. This Wednesday, existing home sales numbers are released, followed by new home sales on Thursday. With a full week of Fed speakers discussing interest rates, one has to wonder: Will any of this lead to more affordable homes? The primary objectives of the Federal Reserve, as defined by Congress, are promoting maximum employment, controlling inflation, and moderating long-term interest rates. Increasing homeownership is not one of their mandates. Clearly, interest rates significantly affect home affordability. But if you look at the graphic below, we are way out of line with the median home price versus median income. If we are looking at higher rates for longer, what can be done to narrow the gap? Here’s a couple of ideas for discussion: → Direct-to-Consumer Home Manufacturing Idea: Utilize modern prefabricated and modular home technologies which allow for the mass production of homes and apartments at lower costs. These technologies reduce costs by minimizing labor and waste during the construction process. Companies could sell these directly to consumers, bypassing some of the traditional capital raising, construction, and real estate brokerage costs. Examples: Look at companies like ICON, which uses 3D printing to build homes quickly and at a fraction of the cost of traditional construction. I think this could also work for direct to consumer apartments with fractional ownership. I know a few people working on that one. → Cooperative Housing Idea: Promote housing cooperatives where residents own shares in a corporation that owns the property, reducing individual financial burdens and fostering community governance of housing. Example: The Co-operative Housing Federation of Canada provides a framework for cooperative housing, where members democratically control the housing they live in, keeping it affordable. The difference between cooperative ownership and straightforward subsidies is very important. In this model, residents collectively own and manage the housing development. This encourages more resident participation and control, which can lead to a stronger sense of community and stability among occupants. Ongoing costs are shared among members, potentially reducing individual expenses. Of course, many co-ops face financial challenges related to aging infrastructure. Continued investment and public funding are crucial to maintaining these properties and ensuring they remain affordable and safe for residents. But can a modern model be created? What other innovative solutions do you think could help bridge the gap between home prices and median income? #fed #housing

Forget the Zillow price tags. The most important number in the US housing market right now is 72.6. And it’s telling us a ghost story about what comes next. 👇 The Ghost in the Machine: A Terrifying Number is Haunting the US Housing Market An economist just released the National Association of REALTORS® ’s Housing Affordability Index: 101.7. To anyone watching in 2007, that number is a ghost. It means a median-income family has just 1.7% more income than needed to afford a median-priced home. They are standing on a financial cliff. The last time the cliff’s edge was this close was just before the world fell off it. The pre-GFC low was 101.6. We are living in a moment of peak housing unaffordability, a perfect echo of the last bubble. But the brutal logic of unaffordability hasn't led to a frenzy. It has led to a deafening silence. The market is now a ghost town. Transaction volume is a paltry 4.03 million a year—historically, dead quiet. Homeowners, clinging to their 3% mortgages, won't sell. Buyers, facing 7% rates, can't buy. The market isn’t crashing. It’s seizing. This is where you find the truly scary number: the Pending Home Sales Index. It tracks signed contracts and tells you what’s coming next. That number is 72.6. What’s so terrifying? It's now far lower than it ever was during the GFC's depths. It’s the ghost in the machine, whispering that the engine isn’t just seized; it’s not getting any fuel soon. So we’re left with this unprecedented stalemate: A market locked at peak unaffordability, resulting in a historically deep freeze of activity. The real story isn't in the prices on the wall, but in the silence—and the ghost number that tells us the silence is here to stay. #HousingMarket #RealEstate #Economics #RealEstateInvesting #Affordability #MortgageRates #MarketUpdate

In our latest research, we find: - Housing cost burdens reached a new peak in 2023, with 16.9 million homeowners spending more than 30 percent of their income on housing—the highest level in over a decade. - Nearly 60% of the increase in newly burdened homeowners since 2019 came from those spending over half their income on housing—showing that affordability challenges have grown more common and more severe. - Cost-burdened younger and older homeowners have driven most of the increase since 2019, making up 87% of the three million newly affected households—highlighting growing pressure at both ends of the age spectrum. The full analysis and interactive dashboard is linked in the comments!