Housing prices hit a record high this June, despite the fact that overall sales are down thanks to sky-high mortgage rates. But this isn’t true for all communities. Some cities have seen prices fall, even while the local job market stayed hot. The secret of these communities isn’t surprising. They made it easier for people to build, more houses were built, supply went up, and prices went down. It is a playbook that should be copied nationwide.
While constantly rising housing prices may be good for those who already own a home, they are a drag on the economy overall. High housing costs make it difficult for people to follow professional opportunities, delaying or derailing careers, which decreases economic productivity. Then there are the hours lost by commuters in their cars, which could be spent working or enjoying their family. When families spend an outsized share of their income on housing, they have less to spend on retail purchases, dining, travel, and other economic activity.
Most importantly, however, high housing prices delay family formation. Based on historic demographic data, Freddie Mac estimates that there are 3.8 million fewer homes in the United States than there should be and that 1 million households have been delayed in formation because young people can’t afford to move out of their parents’ homes…