False narratives about the U.S. housing market refuse to die. Mainstream media and real estate industry shills continue to deflect attention from the complex, but at the same time rather simple reasons behind the lack of housing affordability. Politico author, Lorraine Woellert, offers us a perfect example of everything that is wrong with the U.S. housing market, including the mainstream media reporting on it.
I hadn’t come across this piece previously, but having now read it, there are a number of red flags that are worth calling out. Woellert seems appropriately concerned that only wealthy millennials are now able to afford the American Dream of homeownership. That’s a valid concern for sure. Woellert jumps off the reservation with her assertion that there is now an “epic housing shortage”. That is patently ridiculous. Apparently Woellert also thinks this “epic” shortage in available homes is what sent home prices into the stratosphere.
Apparently Woellert was out to lunch during the last decade. Her profile suggests she’s old enough to know better. Maybe she’s too close to the industry talking heads? Whatever the case, Woellert demonstrates what I can only assume is willful ignorance of the reasons behind the lack of affordable housing.
We are led to believe that the well-to-do millennial couple profiled in Woellert’s piece were “lucky” to be able to buy their $750K bungalow in Arlington, VA. In this case dear old dad, a former head of the Mortgage Bankers Association, pitched in more than half of the down payment so his daughter and son-in-law could establish some roots near the political swamp of DC. Comically, Woellert calls the couple’s recent purchase a “starter home”, you know because there’s nothing like the smell of entitlement in the morning.
In a complete denial of reality, Woellert offers that the only real fix is more supply, but politicians and zoning restrictions are preventing this from happening. This false narrative has been repeated frequently during the latest housing boom, and it is complete and utter horseshit. Yes, zoning restrictions often put up roadblocks for developers, but not to any greater extent than what we’ve seen in past decades. Real estate developers know how to grease wheels to get projects through the door and build houses.
The affordability problem plaguing the U.S. housing market is a direct reflection of the government and Federal Reserve picking the winners and losers in the housing market. There is no shortage of homes in America, but there is a shortage of affordable homes that average Americans can afford. Spiraling home price inflation was not caused by zoning restrictions. In the latest economic “recovery” rampant home price inflation is a direct result of the government’s decision to bailout Wall Street at the expense of the American public. I could use a lot of terms to describe the couple in Woellerts’ piece (well-connected?), but “lucky” isn’t one of them.
Apparently Woellert is willing to dismiss the suspension of the rule of law by the previous administration which allowed thousands of illegal foreclosures to clear courts with blatantly obvious fraudulent paperwork. I guess she is willing to ignore the failures of TARP, HAMP and the snow job called The National Mortgage Settlement, which subsequently facilitated the rise of Wall Street landlords, billionaires who now own tens of thousands of single-family properties across the U.S.
I guess Woellert has never heard of the Federal Reserve, an institution which has facilitated massive wealth and income inequaltity, and thus housing inequality along with it. The endless liquidity provided to Wall Street by the Fed sparked an echo bubble in real estate where the “wealth effect” was not evenly distributed, but where wealth has instead flowed to the top. This was no accident, and you would have to be delusional to suggest otherwise.
Rather than detach Fed policy from the stock market or the housing market, the Fed’s new chair, Jerome Powell, is carrying the torch of continued wealth inequality. Powell was relatively quick to cave to the market’s wishes, choosing to do Wall Street’s bidding and levitate the current collection of asset bubbles even further. It will be extremely difficult to solve the housing affordability problem when our own central bank is expressly preventing/deterring affordable housing.
Building more homes can only do so much to curtail the decline of housing affordability in the United States. What would help even more is a factual accounting by the media of what really created our two-tiered housing market, one where the haves and have-nots are dealing with divergent opportunities for housing.
Rather than paying tens of billions in risk-free profits to banks, the same banks where the executives running them still have not atoned for their role in the Great Recession, maybe the Fed could put its money where its FOMC mouth is and spend $30 billion annually in direct investment on affordable housing. Just a thought.