http://www.cnbc.com/id/102255780
This article describes a recent issue facing large cities with the strongest job markets. Homes in those areas are becoming too expensive for young graduates looking for work to afford. This situation is limiting the choices of prospective homeowners into areas with less than ideal work options.
After the crash in the housing market before the recession, credit restrictions have rubber-banded back and are restricting new people from purchasing a house, regardless of their income situation.
One solution suggested by the author is building more homes in the more expensive areas to drive down prices. Unfortunately, the situation might get worse before it gets better, if more jobs are created without a matching increase in housing options.
Since banks are not loaning out to builders as much as they did before the recession it's going to be hard to increase the housing supply. The reason homes are so expensive in those areas is because there is a demand for those expensive homes. Wages will have to increase in the near future in those areas if firms want to have well qualified employees.
ReplyDeleteOne of the reasons that the 2009 crisis occurred is that too many houses were being built and people bought homes that they cannot afford. it is interesting how the situation has shifted, and now people who should be able to afford homes are having trouble buying them. Hopefully this situation will work itself out and the housing market will go back to normal.
ReplyDeleteThis is an unfortunate situation, although not unexpected. Demand is so high in those areas that it is unlikely price will go down any time soon. In the next few years, the housing market might hopefully stabilize.
ReplyDeleteI think the place you see this problem the most is in New York. There is a reason most college grads or young families live in Brooklyn, because Manhattan is just too expensive to be feasible. My 27 year old cousin is paying $3,600 a month for his small one bedroom apartment on the west side. But this obviously correlates with the higher wages in New York, so the prices can be slightly justified. However, they are too high, even for the increased wages in Manhattan.
ReplyDeleteHopefully as the economy settles back down from the recession banks will begin to loosen up on their requirements for purchasing a house. I know that the recession was caused by banks being too lenient on lending for houses, but it's also not good for the market if they are too strict.
ReplyDeleteHomes on nicer areas have a much higher demand than those in poor areas allowing the market to increase the price on them. This makes it difficult for home buyers, especially new ones, to get the house that they want.
ReplyDeleteThis is an interesting idea. In some areas, however, particularly in high demand areas, there is simply no more room to build. On Manhattan for example, there is nowhere to build any more housing. Many who work in these areas make tradeoffs by living elsewhere, in more affordable neighborhoods outside of the ones in which they work. In other, less desirable areas, homes demanded still need to catch up with supply. The housing situation in the United States is still certainly complex.
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