The Housing Crisis You Didn’t See Coming, Ep #281

Many people are concerned that rising interest rates will eventually crash the housing market. Future retirees can become overly worried about the housing market since the value of their homes plays a huge role in their retirement plans.

This is why an article from Annie Lowrey at the Atlantic caught my eye. Today, we’ll dive into the article, The U.S. Needs More Housing Than Almost Anyone Can Imagine, and prognosticate the future of the housing market.

After the retirement headlines segment, we’ll discuss what to look for in a tax preparer and hear about Jim’s investment in relationships as he begins retirement.

Future retirees can become overly worried about the housing market since the value of their homes plays a huge role in their retirement plans. Click To Tweet

Outline of This Episode

[1:32] Addressing housing affordability concerns
[7:50] What to look for in a tax preparer
[14:50] What Jim did to improve his retirement

How many homes must be built for housing to become affordable for everyone?

Today’s retirement headline from Annie Lowrey at The Atlantic explores the question, how many homes must be built in the United States coastal cities for housing to become affordable for middle-class and working poor families?

The answer wasn’t as cut and dry as the author expected. It turns out the question is challenging and has multi-layered answers.

Americans spend more of their income on housing than in the past

Anne begins the article with a few statistics.

47% of Americans are considered burdened by spending more than 30% of their income on rent.
11 million people, or one in four renters, spend more than half of their income on shelter.
Current renters spend 10% more of their earnings on housing than they did in the 1970s.

These statistics make it clear that the US needs more affordable housing. It is estimated that there is a supply shortage of 3.8 million units.

The statistics make it clear that the US needs more affordable housing. Click To Tweet

How to lower the cost of housing

Each year, high cost of living cities like New York create more jobs than homes. In cities like New York, San Francisco, Boston, and Los Angeles, only one new home is built for every 20 jobs created.

Although more housing leads to lower housing costs, this might not be true in high-demand cities. Even if more units were created, pent-up demand in those places would probably lead to a flood of new residents.

The author estimates that the United States would need 75 million more housing units to combat high housing costs and make prices affordable for all incomes.

Understanding the statistics can go a long way to calm any worries of a looming housing market crash. Click To Tweet

My thoughts on the housing crisis

I wanted to share this article with you all to ease any worries about an impending housing collapse. We aren’t in the same situation as in 2008. There isn’t an over-leveraged housing situation driven by speculation.

Since the demand for housing is so far ahead of the supply, rising interest rates probably aren’t going to collapse the market. While we probably won’t see the same type of rapid appreciation that we have experienced over the last decade, we may see a bit of stabilization or slower appreciation.

While I’m no expert, understanding the statistics that we are dealing with can go a long way to calm any worries of a looming housing market crash.

Make sure to stick around until the end of the episode to see what you need to look for when looking for a tax preparer. Then you’ll be inspired by Jim’s actions to improve his social network in retirement.