Housing Policy

Harvard Housing Researchers Confirm That Supply and Demand Are Real

Plus: Hong Kong police raid a pro-democracy newspaper, Fed officials change their tune on inflation, and more...

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The pandemic and post-pandemic recovery continue to prove that supply and demand are real when it comes to housing costs. A new report from Harvard University's Joint Center for Housing Studies (JCHS) has found that a drop in the number of homes for sale has produced double-digit percent increases in home prices.

"The supply of existing homes for sale has never been tighter," reads the JCHS report. "The combination of robust demand and limited supply lifted home prices to their fastest pace in over a decade."

As of February 2021, the number of homes on the market had fallen 37 percent over the last two years, the report found. Only 870,000 single-family homes are available for sale, the lowest since 1982. Meanwhile, home prices rose 13 percent year over year as of March 2021 nationally. Hot metro areas like Boise, Idaho, and Austin, Texas, saw home prices grow by over 20 percent.

Record high building material costs aren't helping matters. The price of new home construction inputs has increased 14 percent over the past year, with softwood lumber prices alone jumping 83 percent, according to the JCHS study. That's added $36,000 on average to the cost of a new single-family home. The Biden administration's tariffs on Canadian lumber are only fueling these cost increases.

Higher demand for homes—produced by a mix of low interest rates, high rates of household formation, and an explosion in remote work—have also contributed to the price spike.

These pandemic-era trends pushing up the costs of homeownership are made worse by America's long-running failure to build enough new housing to keep up with demand.

Housing construction fell 5.5 million units short of historic levels over the past 20 years, according to a report from the National Association of Realtors (NAR) released the same day as the JCHS study. The NAR report also found that since 2010, new home construction has fallen 6.8 million units short of what's needed to meet new demand, reports The Wall Street Journal.

"The scale of the problem is so large," David Bank, one of the NAR report's authors, told the Journal. "We need affordable [housing], we need market-rate, we need single-family, we need multifamily."

Rising home prices don't resemble what happened in many big cities' rental markets during the pandemic. The wave of newly remote workers leaving places like New York City and San Francisco in favor of the suburbs or midsize metros in other states saw double-digit percent declines in rents and vacancy rates of 10 percent or more in many urban areas.

Rents continue to fall in seven out of eight of the country's largest metro regions, the JCHS study found, even as national average rents are starting to tick up for the first time in a year.

Whether looking at rising home prices or falling rents, the lesson of the past year is pretty clear: The price of housing is inseparably tied to the number of existing, available units and the costs of producing new ones.

The solution to long-running housing affordability problems in many major American cities, therefore, is to increase the supply of housing. That can't happen until states peel back all the regulatory red tape they've layered onto the construction of new development.


FREE MINDS

Hong Kong police raided the offices of pro-democracy tabloid Apple Daily on Thursday. The paper said on Twitter that five of its executives, including Editor in Chief Ryan Law, were arrested.

The Hong Kong Free Press reports that hundreds of police officers participated in the raid, the second to hit the paper in the past year. Jimmy Lai, the paper's founder, was arrested in August of last year for violating the city's controversial new national security law. He is currently serving out a 20-month prison sentence.

Press freedom advocates expressed shock and dismay at the raid.

"We have to remind ourselves that until very recently, a free press was regarded as 'normal' in Hong Kong," Yuen Chan, a senior lecturer of journalism at City, University of London and former journalist in Hong Kong, told The New York Times.


FREE MARKETS

Federal Reserve officials are starting to change their tune on inflation. Rising prices that were once dismissed as "transitory" are now starting to cause concern for central bankers.

Bloomberg reports:

"Is there a risk that inflation will be higher than we think? Yes," [Federal Reserve] Chair Jerome Powell told a press conference. He spoke after financial markets were taken by surprise when policy makers signaled they expect to make not one, but two, hikes to interest rates in 2023 from near zero now.

Powell's comments caused stocks and bonds to dip, with The Wall Street Journal reporting yesterday that the Dow Jones Industrial Average closed 0.8 percent lower and the 10-year Treasury yield rose to 1.569 percent, from 1.498 percent on Tuesday.


QUICK HITS

• The House of Representatives passed a bill making Juneteenth a federal holiday commemorating the end of slavery. It now goes to President Joe Biden's desk for signing.

• China has sent a crew of three astronauts into space to man its new space station.

• North Korean dictator Kim Jong Un described the food shortage in his country as "tense" during a meeting of the ruling Workers' Party central committee, reports The Washington Post. Could those potato production statistics have been exaggerated?

• Dodgy welding is responsible for a subway collapse in Mexico City that killed 26 people, according to a preliminary report on the incident.

• The last lockdown states are lifting their COVID-19 restrictions. Now people want to know if they still have to wear their damn masks.

• A Minnesota man has been charged with murder after allegedly driving a vehicle into a crowd of protestors in Minneapolis, killing one.

• Former President Donald Trump blasted Biden's performance during his meeting with Russian President Vladimir Putin, telling Fox News host Sean Hannity, "We didn't get anything. We gave a very big stage to Russia, and we got nothing." Sad!