The Expert Podcast

…Here's the real reason why home prices are as high as they are It's not anything about interest rates It's not about corporate greed It's not about anything other than there's a shortage of homes. Millions of housing units are needed in the U S. Most expensive cities. Are expensive because of policy What is the policy and who is behind it? The biggest reason affordable housing isn't available is because there's not permitting. To build enough homes. Most…cities. that have a housing problem have very serious permitting restrictions where it's either difficult or impossible to…get a new permit for new housing. Structure. Unless the fees and impacts and all of the other. legalities around it are…very expensive So in some cities, just the permit fees. And regulatory requirements add three or 400,000. to the cost of building a new house before even by the property of break ground. Sometimes you can't even get. I have a new permit. No matter how much you spent as an example in California. The reason California has the affordability problem is because we did not build in the sixties and seventies. They were building two to 300 homes per year. Even in the last boom they only built a hundred thousand so that's a half or a third that's during the time when the population was booming. So what is the shortage while we've talked about it before? But the number of new units needed to be built estimates the shortage to be somewhere between four and 7 million. One estimate says it's 35 million shortage of homes. That the number that most people use is about 5 million which is in this range But think about it. If we're 5 million homes short right now, every year that number is going higher because even though some houses are being built…It's not at the same rate that more housed. households are being created People are graduating college, forming families moving out of the parents' house. immigration. Are all adding. The need for more housing units whether it's apartment condo, single family house multifamily whatever you need more housing units And here's the problem. The current. Housing slowdown and higher interest rates is forcing builders even to build fewer homes. I'll bet you if you go back and you see this number here they talked to. A hundred thousand. In California during the boom. Right…I'll bet you if we look back. In the next couple of years, that number will be even less. And this is during a housing crisis California knows that more home structures are needed. But I can guarantee you that there'll be less than a hundred thousand health homes built in California. In 2023 and 24 just because builders don't want to. the money for the impact fees, California. the rough number for our typical single family house is 200 to two 50. For all the permits and it may take two years or three years to get them that's additional carrying costs for that property. So the takeaway is. The price of a house. Going up. Has more to do with supply and demand, meaning that. There's not enough homes to go around It's like musical chairs. There's people that want to buy a house that there's not enough houses to go around So. that's naturally going to bump that price up. Certainly as interest rates go up. And that's the price is higher That may cut back on some of the demands Some people just can't afford it. They can't pay them out even if they can't find the house, but there's still enough buyers out there that have the affordability have the income. Or we'll somehow struggle to afford that higher price at the higher interest rates. Leaving the others still without a housing unit to call her.