A little background: I grew up in Sylvania, Ohio and after undergrad, I packed up a carrier van and moved to New York City with the full intention of never looking back. I would spend the next decade there working in scent marketing and digital media all while simultaneously pursuing a career in acting.
It was while fully embracing the “New York Hustle” that I met my future wife, Tamara, and over the next few years the two of us decided it would be in our best interest to move out of the city if we ever hoped to buy a home and raise a family of our own. Listen, I love New York, but it’s simply not a place to raise children unless you’re either a masochist or extremely wealthy—like oil baron wealthy. And to own real estate? Well, I hope ole’ grannie left you a suitcase full of gold bars. In 2019 the average rent for a two-bedroom in our neighborhood was roughly $3,000 per month and we knew things would only go up. (At the time of this writing, that same apartment is renting for a little over $4,700 a month.)
So, my wife and I packed up our one-bedroom apartment in the heart of Brownstone Brooklyn, and with the encouragement of our families, moved back to my hometown in the fall of 2019. Little did we know, a life-altering global pandemic was about to throw all our lives into chaos and put the prospect of buying a home on pause.
COVID-addled but ever-resilient, we settled into our new jobs and found a house to rent while we started searching for a home we could call our own. We quickly found ourselves in a very tough position as potential first-time homebuyers. 2020/21 saw interest rates at historic lows which meant money was cheap but, as many of you know, this led to skyrocketing home prices. A modest 1,500 square foot home saw its value nearly double overnight, and when it came time to even consider putting in an offer, with zero equity and limited savings, we were never in a position to offer the sometimes $50,000 or $80,000-plus over asking.
We had left the city and its exorbitant prices behind only to find ourselves in the midst of one of the largest housing price booms of the last 20 years. (Though it’s important to acknowledge, especially in light of the homelessness crisis gripping so many American cities, the inherent privilege in even being able to make these considerations.)
This brings us to today. With interest rates on the rise, home prices have subsequently started to fall and demand (while still present) has tempered. But as a potential homebuyer with a growing family, the softening of the market is only half the battle. Sure, people aren’t putting in offers $80,000 over asking, sight unseen, but real estate agents are still listing homes at inflated prices hoping the COVID housing boom of yore wasn’t a boom at all but merely a reflection of the real issue at hand: inventory.
To counter the inventory dilemma, homebuilders are continuing to build new homes. However many, if not all of them, are well outside of the budget of a first-time homebuyer; not to mention the “cookie-cutter” housing developments springing up are in many cases challenging to find inspiration in. For many, buying a home is as much an emotional investment as a financial one and when you picture that place where you’re going to put down some roots, you want it to look and feel uniquely your own. Even a few variations in exterior color, materials and floor plans can make a development feel more like an organic neighborhood and less like something that came off a production line.
Like many other young families or first-time homebuyers, we’ve been put in a tough position where we essentially have three options.
We can continue to rent, but the problems with renting were a primary reason we moved away from New York City. Sure, when you’re a renter you don’t need to worry about unforeseen expenses like the furnace breaking or basement flooding, but as rents continue to rise, we find ourselves spending more and more with zero opportunity to build equity.
We can look at a new construction “starter home,” but as stated earlier, the term “starter home” is comedically misleading. I could spend the next few paragraphs ranting and raving about this subset of the real estate industry—its prices often exorbitant for first-timers and its finishes lacking warmth.
This leaves us with the third option: buying an existing home. It takes me back to the struggles we are currently facing. Existing home inventory is low, and most of what’s available is either overpriced or will require serious renovations. As a first-time homebuyer contending with high interest rates and inflated prices, that bathroom or kitchen remodel is going to need to take a backseat for the foreseeable future.
Now we’re not going to solve this national problem in a simple blog post, but we must ask ourselves, does the homebuilding industry really think they can continue doing the same thing over and over again? Are we going to continue to watch the American Dream of owning a home slip further and further out of the reach of young families? Coastal cities like New York City and San Francisco are millionaires' and billionaires' playgrounds where even those making well over six figures struggle to own a home. Are we going to let the same thing happen in America’s heartland?
We all understand that there are multiple factors that influence the price of a single-family home, but we must do better to find solutions. If a developer can find alternative materials, building processes that speed up construction, or technologies that create budget savings that trickle down to the homebuyer, it’s a win-win for all parties.
Like the financial markets, the real estate industry is a market and as such there will be ebbs and flows, ups and downs. However, housing prices have historically risen year over year. If wages keep up, this isn’t a problem, but they’re not. At some point, the single-family construction industry will need to innovate its processes if they want to see their business, and their communities, succeed.