Issue link: https://digital.nexsitepublishing.com/i/1479050
Robust urban centers remain magnets for young professionals, and families in the millennial cohort have entered the housing market in force. P ointing out how expensive housing is has become its own genre. How many articles do we really need on hot, hot, hot housing markets? Is there any end in sight for breathless reports on the monthly numbers? Probably not, because even with recent interest rate hikes and some cooling off locally, national home prices are still sky-high. According to Axios, in 2022, the national median price for existing homes rose above $400,000 for the first time in history. And that's on the low side for the Puget Sound region. Earlier this year, the median home price neared one million in King County. As of this writing, a recession lurks on the horizon and a "correction" seems inevitable, but the market is unlikely to crash like it did during the Great Recession. Vast numbers of Americans will remain frozen out of the housing market, and there's a lot of understandable frustration and blame to go around. There are a host of interrelated factors that have contributed to these high prices. Let's take a look at a few. Shifting Demographic Sands The story about mass flight from cities to suburbs during COVID lockdowns may have sold online subscriptions, but it wasn't really true for Seattle. In fact, according to the latest census data, the bulk of our region's demographic growth over the last few years landed in urbanized King County. Seattle is not dying; it's running full speed ahead. Many people are trying to buy homes in popular markets like ours, so demand for limited housing is very high. Robust urban centers remain magnets for young professionals, and families in the millennial cohort have entered the housing market in force. Employers like Amazon mean a high-skilled, high-earning workforce that can afford to buy. It also means a lot of people are priced out. The Wages of Inequality Many people were never priced in. Perhaps the biggest barrier to housing in the U.S. is economic inequality. It's not so much the price of housing itself; it's that earning power has not kept up. Wages for low- to moderate-income workers have stagnated over the last few decades and now workers have to contend with supply chain disruptions and inflation taking a bite of their paychecks. With low wages and high costs of living, just making rent means never saving up. As Barron's reported in February, "full-time workers simply do not earn enough to make a down payment on a home" in many U.S. housing markets—especially after COVID layoffs. On top of this, many historically marginalized people don't have existing home equity or access to intergenerational wealth, making a down payment on a home insurmountable. Tales of Investment Capital The old canard that Wall Street investors are responsible for high prices is wrong, but there is a kernel of truth. As reported by Fortune 14 master BUILDER | FALL 2022