A House Is Now 150% More Expensive Than In 2019 And Here’s Why

The American Enterprise Institute just said that average house prices have risen 150% since 2019 but honestly, did you really need a study to tell you that? Just take a deep breath in. You can smell it in the air.

Couple this with home loan rates two-thirds higher than in 2019 means that three in four households will likely never own their own home. So how did we get here? And more importantly, how do we get out?

High House Building Costs

High material costs, labor shortages, tighter building regulations and various other market factors mean that building costs have outpaced inflation and now account for 60-70% of the cost of bringing a new house to market.

This is a large factor, but this alone isn’t the main factor pushing up house prices, so let’s keep going, shall we?

Lack Of House Supply

There’s simply not enough houses and not enough being built at the rate of the growing population. Counterintuitively it might be the houses and the top end of the market that may need a supply boost since wealthy buyers are currently competing with the middle class for housing, driving up prices for everyone.

Never thought I’d say this, but GIVE RICH PEOPLE HOUSES!

Over Regulation

The above problem seems to be the obvious cause so, if we’re all in agreement, then why don’t we just build more houses? Well, there are a lot of restrictions such as parking requirements, height restrictions etc. that mean houses are expensive to build or just never get built in the first place.

Oh and Also I feel like COVID is a factor

Didn’t really cover why this is after 2029 in particular, but I reckon it must be COVID, right?

So What Can Be Done?

Thankfully the problem might have finally bubbled over to the point where politicians can’t ignore it anymore.

Donald Trump and bizarrely, gavin Newsom have come together to support a bill that would prevent large investors from buying up properties to rent them out.

Seems good on paper, but there’s been some pushback. “There’s no empirical evidence that large institutions have driven up housing prices,” says Ed Pinto, codirector of the American Enterprise Institute Housing Center.

“These companies are not pillaging homebuyers,” he continued. “It’s just the opposite. As more and more people can’t afford to buy single-family homes, they’re providing the option of living in one at lower cost by renting. That takes those people out of the purchase market, and hence can take pressure off prices.”

But it seems like a chicken or egg problem and from the sounds of it, this housing crisis will need a multi-pronged attack to get solved. Trump’s policy might be a start but there’s still a long way to go before this problem actually gets solved.