- When it comes to the
affordable housing crisis, people think I'm totally insane but let's just look at a simple statistic that I can pull up from
any Google search anywhere. And then you can't even argue with this. In 2011, the average American
income was about $50,000, just a hair over. In that same year, the
median house cost $214,000. That economic divide is even bigger now. In 2021, the median income
has only increased $18,000, which seems like a lot,
but it's really not when you look at how much
the median house costs. The median house right now is $389,400. And it's expected to
go up to over $408,000. It's almost $100,000 shy
of a half a million dollars to buy the average home
in the United States. If that's not an affordability crisis, I don't know what the heck is. So today we're gonna be talking about what's causing the affordability crisis. 'Cause everybody likes to
do a lot of finger pointing, but I'm gonna show you the real facts of what's really going on. And I'm gonna give you some solutions that I've come up with along the way. According to Keeping Current
Matters and Black Knight, there are six states that
are currently unaffordable, and haven't been affordable
for homes for over 25 years. That's Arkansas, Iowa, Kentucky, Louisiana, Maryland, and West Virginia. So why are houses becoming
so much less affordable? Well, there's a few reasons. One of the reasons is because
at the start of the pandemic, the Fed went ahead and
dropped the interest rates to historic low levels, and that increased the amount of people that were interested in purchasing, especially if they were
thinking about moving out of the city to get more of a rural area since they were working from home anyways, and many employers have even
said they could work from home until after the
Pandemonium, the Pandorama, whatever you want to call it. So that in turn, went ahead
and increased the many people that were really interested
in moving to more rural areas. And, of course, that made rural areas that were generally
actually pretty affordable become a lot more
expensive, like 20 to 25%, especially in areas of Texas. Austin, Texas, I think is
at least 25% right now. Because a lot of home sellers
weren't really interested in selling during the time of a pandemic, can't really blame them, but it also caused the
affordability crisis to blow up out of control. And it didn't help that home
builders weren't building. - This report though came with a warning, construction costs now
up 12% from a year ago, not just pushing home prices higher, but NAHB's chief
economist, Rob Deitz said, some builders are slowing sales to manage their own supply chains, which means growing
affordability challenges for a market in critical
need of more inventory. - So after the last housing
crash in 2008, 2007, whenever you want to say
it officially started, because there was so much
speculative home building during that time, a lot of home
builders lost their rear end and they were like, we're
not doing this again. Instead of building 30 speculative homes, we're only gonna build about three to 10, and then they would write
contracts on new builds as long as they were holding that deposit. Which ended up being a terrible
thing during this pandemic because there were so many people that really wanted to get
into a brand new house, or any house for that matter. Another thing that worked against
the home builders was even if they wanted to build a home, they couldn't find the
building supplies in 2020, as more shipments were
blocked in all these ports. You know, I don't know if you know this but ships actually have to
sit in the harbor for 10 days before they can actually
unload everything. It's like their own quarantine time, which is causing a major delay. And of course, as things get
delayed, the supply goes down and then building materials
start costing a lot more. Matter of fact, a home that
used to cost $10,000 to frame up is now over $38,000 to frame up the same exact home just because of the framing
and how much lumber costs. It isn't just the cost of the lumber. It's still the cost of
the roofing supplies. It's the cost of appliances. It's the cost of HVAC systems. Everything has increased. So a home that a builder
would have sold a year ago for 200,000, with market
conditions the way they are, it could be selling for almost 500,000, depending on where you live. Now a cold-hearted economist will tell you we don't have an affordability crisis, we have an affordable rental crisis because they say, "they," say that most tenants don't
really want to buy a house. They wanna rent, which I
think is total hogwash. And their suggestion to fix the problem is to basically build more
rental units and apartments for the average American to live in. Why is this okay to have
middle America in rental units? Not the American dream that I remember. So at the beginning of the pandemic, we already had a housing
affordability crisis. There was already almost
8 million Americans that couldn't find affordable housing. And now that number is
gonna continue to grow as the home prices continue
to grow throughout the summer. There just isn't enough
homes on the market to satisfy how many buyers
are looking to purchase one. They still have been predicting that more houses are gonna
be entering the market, and hopefully that will
drive the prices down. So I know a lot of people that are looking for more affordable housing options are looking for the
answers in a housing crash. I've talked to many real estate agents throughout the country, and I speak to them every single Sunday, and every guest I've had on said, we are not gonna be seeing
a crash anytime soon. - The people that say it's going to crash, I'm like, based on what? Everyone is kind of predicting
this 2007, 2008 to reoccur. And it very well might be,
but it's not gonna happen for the same reasons
that caused it back then. It's gonna have to be for
entirely different reasons. Back then, it was really
easy to get into a loan. I mean, anybody could get into a house, and even people that
couldn't afford the houses. The houses were being overbuilt. Then there was all the
shenanigans going on in the secondary market. And that type of stuff
doesn't exist today. I would say the last 12, 13 years, the lending guidelines
have been super strict. It's probably the best book of business that banks have written ever
in history this last decade. So the paper's really strong. There's not a bubble
to burst at the moment. Like there's not enough housing available. To that point, that the
market is going to crash. It very well might, but I don't see what's
actually going to cause it yet. - And at the beginning of the pandemic, I genuinely thought there was
going to be a housing crash, but that's before the Congress decided to pass all these forbearances. And if you don't know what forbearance is, is when the mortgage
company allows the borrower to take the payments that they would normally
be paying that month and tack those onto the end of the loan. So they can extend out the length of time that they have the loan with no penalty. So if you had a 30-year mortgage, and you didn't pay your
mortgage for a year, those payments would have go ahead and be tacked to the end of the year. And there would be no
penalty to you as a borrower. It's a great plan for someone
that already owns a home. But if you were waiting for a
big windfall of foreclosures that isn't gonna happen. - It's a flash headline. - It's a flash. So mortgage forbearance drops 4.36%. And this is another one from Housing Wire. And this is Alex Rojas. "The downward trend of
borrowers in forbearance "picked up speed in
the last week of April, "falling 11 basis points to 4.36%. "That is the 10th consecutive
week of decreases. "And it reflects a faster rate of exits "and a steady low level of new requests." But this is a great sign of
people going back to work. Either got a new job or
are back from a furlough or whatever may have happened to them and they're back to it. So those numbers declining
is obviously a good thing. - As it stands right now,
as of June 30th, 2021, the forbearance program
through the government is supposed to expire,
but they can still file for forbearance all the
way up 'til June 30th. And even if they file on June
30th, they can still extend that out for another
additional six months. With that being said, let's
just say that these people didn't pay the whole entire year. June 30th comes around,
they don't extend it, and they go into foreclosure. That process to foreclose on those people is going to take a minimum of 400 days, minimum of 400 days. And it can take months, even years, for those to foreclose on. So if you're waiting for a
big wave of foreclosures, it's not gonna happen this year and it's not gonna happen in
probably the next two years. So if that's the affordable
housing solution for you, you may wanna reconsider. So what are some solutions to the problem? Well, after World War II,
they made a big GI Bill that allowed for soldiers
to come back from the war and be able to have a
low interest mortgage to buy a very small home. And many GIs did. This is how a lot of baby
boomers increased their wealth. And how did they build
those houses so fast? Modular construction. And it was so popular then even people were building
houses from Sears and Roebuck. I've even talked about that
on my channel before, too. But now for some reason, people
have a negative connotation of what a modular home truly is. I'm here to tell you it's no different than a traditional built home. They're built to the same specifications that you would get on a
traditional built home. It just so happens that a
lot of the pieces are pre-cut and put in a box and shipped
to the house at one time, which is really great because you wouldn't have
to have the building delays that it would take with
a traditional built home. This will also be super
affordable for home builders 'cause they wouldn't have a
delay on building materials. With a lot of modular homes, they don't even have to
like put them together like you would a traditional built home. Sometimes they're already
half put together. Like the panels of the walls
are already put together. So they're connecting them
together, almost like Legos, again, making this a lot
quicker for a home builder to put a house together. There's another type of home,
which is called a kit home, which is a traditional built home, and it's brought in by panels. It's very similar to modular and it's built to traditional
home standards as well. Again, this would be super
inexpensive for a home builder to do because everything's
done in one stop shop. The other big cost of building
a home is of course the land. So if an area was super
serious about trying to find more affordable housing options, they could sell home builders some of the unused public land, or they could rezone a lot
of the commercial areas that are not being used and
haven't been used for years. And what if an area
was able to rezone that and made it get residential, and then put zero lot line homes and allow for these smaller
modular houses to go in and use that space for residential affordable housing options instead of it sitting there vacant. It's a plus for the area because you're getting more tax dollars because people are paying property taxes. It's a great way to use unused space, especially in commercial areas, as more and more people are
deciding to buy things from home and no longer traveling in their cars to get to residential storefronts. Now there's one more housing solution that has happened throughout
the United States, and that is turning old
malls into condominiums. They have the space,
they have the parking, they have the plumbing, and all they do is
remake those storefronts into condominiums. Not only that, in some
of these abandoned malls, they've gone ahead and made
storefronts at the bottom, like Starbucks and dry
cleaning for the people that are living in the condos above. So it's like a win-win. It ends up being a little
micro-economy inside the mall. So as more malls fold up
throughout the United States, it's not a bad idea to look at those and turn them into
affordable housing options. But what can you do right now if you're currently looking
for a home to purchase, and you're having a hard time
finding an affordable home. So hudhomestore.com is one
area that you can go ahead and try to find foreclosures in your area. Granted, some of these are
going to be fixer uppers but because it's hudhomestore, you will not be fighting
against foreign investors or big corporations
because they put a timeline for the regular person
to purchase the house before these foreign investors
and other investors come in. This will give you an advantage, and yes, they will take your offer
and work with you first, before they even give it
to any kind of investors. That is a great place and resource that you should know about. Now in order to get these
homes, you're gonna have to work with a HUD-certified real estate agent. Most real estate agents are. If they're not, it just
takes them a few minutes to fill out the forms and
have their broker sign it and they can be. Now it is a contract bidding process. The timeline of getting
these things done and closed is gonna take a little bit longer, but at least you're getting
into a house for a fair price. Another great place to find
foreclosures in your area, and that wouldn't even be
on the MLS or even Redfin or realtor.com or any of those
big ones, is foreclosure.com. Matter of fact, I actually found
a great investment property for one of my investors
on foreclosure.com. Now just note that
you're gonna be competing with other investors that are
looking at these foreclosures as well, but it's a great place to at least take a look at them. Get in with my affiliate
link to foreclosure.com, you get a discount for using the website, and you can use it for 30 days free. So maybe you can get yourself
a house within that 30 days and you want to have
to pay the monthly fee. I hope that's the case. That would be really
good for you (laughs). And one more place you may wanna try to find a home is to look through for sale by owner websites. Now, when you see a for
sale by owner house, that does not mean you can't
use your real estate agent to write up a contract and represent you in purchasing your home. Matter of fact, I strongly
recommend you don't do that, because if the person
that's selling the house has never sold a house before and you're the person
that's purchasing a house and you have no idea what's going on. Both of you are probably not
being represented fairly, and you have no idea
what's in that contract. Your real estate agent's gonna be able to put together your contract, make sure that all the
disclosures are done and you're protected all the
way to the time of closing. Even if you're letting go
of a lot of contingencies in order to get your house
closed, I still would not do it without the representation
of a real estate agent. And I'm not just saying that
'cause I'm a real estate agent, I'm telling you 'cause I've
seen a lot of nonsense happen and then people move in and then they find out
the house has black mold, and there wasn't anything
you could do about it because you signed all your rights away because you didn't know
what you were doing. I know that if you've
been looking for a home for a hot minute right
now that for the past year it's been very difficult to find a house. And if you do find a house, it ends up being like there's
14 bidding wars on it. And then the offer that
has gotten accepted is usually tens of thousands
over the asking price. I wanna share a little bit of good news that I've seen whispers
of many posts of agents saying I can't believe
my house has been sitting on the market for over 10 days. So it's already starting
where people are saying I'm not gonna pay that much for a house. So that is a good sign that
maybe some tides are turning and sellers are gonna have
to come back to reality. But like I said, those
economists have been saying that the statistics show that it is still gonna be going up and the median price of a home is going to be going up to about $408,000. That still blows my mind. The fact that in about a year from now, a house is gonna cost a
half a million dollars for the middle American to
afford is astronomically scary, but there is solutions. We just have to work together
in order for them to happen. So what do you think is the solution to the affordable housing crisis? Let me know in the comments section. My name is Kristina Smallhorn,
Your Real Estate Whisperer. And I tell you about this because good real estate
information matters.
