An opportunity to root for fixing a broken system.
Published June 12, 2020
Things May Not Be as They Appear
Many residential industry experts are heralding what appears to be a quick recovery of the housing market with traffic to new home developments and sales bouncing back to pre-COVID-19 levels. “Housing will lead us out of the recession” they say. A “V”-shaped housing recovery is at hand. Baloney! A "W”-shaped housing recovery starts with a "V".
Let’s look behind the headlines in the industry media. New homes and the few listings on the resale market are being quickly snapped up by those who have jobs. This is opportunistic buying caused by the liquidity-induced lowest mortgage rates in history.
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Economic Turmoil Impacts Groups Differently
This is not such good news for those that have lost their jobs. They aren’t participating in this buying spree. For the most part these are jobs at the bottom end of the pay scale and at the root of income inequality. These folks are not able to afford decent housing.
In a tight housing market as we have today, those with jobs and increasing incomes crowd out those with less income by driving up the price of scarce land and structures in the knowledge capitols of the country. New housing projects are controlled by municipal governments that restrict growth in these highly productive regions of the U.S. The manifestation of this control is that those who can’t afford to live in these areas can’t access the better jobs that are available there. It’s a vicious cycle. Of course, this is just one of many factors in the complicated equation that dictates housing attainability.
For example, African American home ownership peaked at 49.1% in 2004 as compared to 76.2% for non-Hispanic and non-African American. Then home ownership among blacks slid to 41.1% by the end of 2018 (an 8.0% drop) while white home ownership slid to 73.2% (a 4% drop). Remarkably as 2020 began, Black homeownership jumped 2.9% while white homeownership jumped 0.5%. Increased Black employment and low interest rates provided more opportunity for these households. What can we do to continue to accelerate such improvements in wealth-building through home ownership and better paying job opportunities?
Beware of Rooting for an Unjust Status Quo
This is not the time to cheer on, or expect, a “V”-shaped recovery. Remember that a "W”-shaped housing recovery starts with a "V". This is a time to solve the structural problems of housing affordability, housing availability and eliminate intended and unintended racist structures that still dog our nation. This is the first in a series of blogs where we will explore these issues.
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About Jeff Whiton
Jeff formerly headed operations for Lennar and KB Home in Colorado building nearly two per cent of the state’s total single-family housing stock. He was honored as Colorado’s Home Builder of the Year in 2001. Whiton also served as the CEO of the Home Builders Association of Metro Denver for eight years reviving the association from near bankruptcy after the Great Recession.