Rising home prices are contributing the greatest economic crisis of the 21st Century.
The housing affordability crisis has exacerbated inequality, climate change, and birth rates.
Economists believe that building more homes and smaller apartments can help to combat a variety of economic crises.
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Falling birth rates Widening inequality. Climate crisis. The housing market is their common denominator.
Three consecutive months have seen record-breaking increases in home prices. The worst buying conditions since 1982 are what Americans consider to be the worst. After decades of underbuilding, supply is still very low.
Summer 2020 saw record low mortgage rates and remote working flexibility spark a wave of panic moves that led to price increases. This quickly drove inventory to record lows. Although inventory has shown some improvement, it is still far below what is needed to normalize this red-hot market.
The US housing crisis is not unique. The pandemic caused home prices to rise in Canada, Australia, Brazil, Russia, Brazil and Turkey. JPMorgan economists stated that the global rally showed "little sign" of slowing down.
Larry Summers, a famous economist, predicted that developed economies were experiencing a period of "secular stagnation" a decade ago. They didn't have enough productive investments to support their economies. This has led to an overinflated housing sector that lingers as a reminder about greater economic problems. The global housing crisis is linked to many of the major economic problems facing the 21st Century if you look closely.
Housing equality is equality everywhere
The ability to own a home lets you profit from the property's rising value, and also allows you to tap into your equity when you need it. Not only does it lock Americans out from these benefits but it also means that they will have to pay landowners monthly rent.
The value of land and properties that are owned or can afford to invest in them will rise. Those who rent homes are stuck paying higher rents and further away from owning a house.
Inequality in income has been long a problem, but housing is what's really causing it, Fabian Pfeffer (and Nora Waitkus) said in August. According to researchers, the largest factor in determining where wealth will be distributed is the distribution of housing equity.
For the Works in Progress online magazine with John Myers, economists Sam Bowman, Ben Southwood, and housing advocate John Myers wrote that increasing home supply could lead to a more level playing field.
They said that increasing the supply of housing and commercial spaces, while making sure existing residents are benefited, could transform this zero-sum world into one where everyone is better off.
A home is essential for the formation of a household.
Affordable housing is a great option for Americans looking to start families or grow their homes. However, costly housing can hinder such plans. The lack of affordable housing might be already affecting birth rates.
According to the Organization of Economic Co-operation and Development, women in developed countries have fewer children than they would like. In 2007, fertility reached its peak, before plummeting during the Great Recession. It is now on the decline.
Even though factors like increased contraception use or climate-related fear contributed to the slide of the stock market, Insider's Hillary Hoffower reported that the main driver was the economy. Women's plans to have children were impeded by the lack of affordable childcare, low wage growth and persistent gender inequalities in the workplace. Larry Summers' secular stagnation prediction has discouraged procreation. It's difficult to have children when you don't have the means to pay.
According to the European Bank for Reconstruction and Development, a 10% increase in home prices would result in a 1.3% drop of birth rates.
A new type of housing market is needed to combat the climate crisis
Not only should there be more homes in underdeveloped areas, but it is also necessary to increase the home supply. It is possible to rethink housing in dense urban areas as a way to combat home inflation and climate change.
Carbon emissions from urban areas such as New York City and Philadelphia are lower than those of rural or suburban locations. Public transit is available in cities, which require fewer trips by car.
In a recent interview, Jesse Arregun from Berkeley, California said that one of the best ways to reduce greenhouse gas emissions is to have people live near their jobs and encourage them to use public transportation. Arregun is a major proponent of denser apartment building, especially near transport hubs.
The housing market in the world has a choice: To either address these interconnected crises, or to stagnate.