Why buying a house feels impossible right now


Over the past five years, Devon Lawrence and Eren Mendoza have experienced a transient lifestyle within the expansive desert surroundings of Phoenix. Their journey has taken them from camping next to a highway off-ramp, where they relied on a gas station for hygiene needs and a plastic tarp for protection against the sun, to living on an air mattress in a friend's living room. For the recent two years, they have found themselves in cramped motel rooms, handing over as much as $650 weekly for accommodation.

At 32 years old, both Mendoza and Lawrence are employed—she at a supermarket deli and he stocking shelves at a convenience store—collectively bringing in around $3,500 per month. Despite their dual-income status, they face a significant challenge in securing an affordable and safe home in Phoenix, where rent prices have surged to approximately double over the past ten years.

"The costs are just astronomical," mentioned Ms. Mendoza, highlighting the commonality of housing affordability discussions. "It's absurd that our combined incomes can't cover our basic living expenses."

The daunting math behind securing housing contributes significantly to the economic unease prevalent in Phoenix and other major cities across the United States, potentially impacting the upcoming presidential election's outcome. Arizona stands as one of the six pivotal battleground states forecasted to sway the presidential race. Although it boasts a lower unemployment rate of 3.7 percent compared to the national average of 3.9 percent as of February, and inflation showing signs of slowing down, the economic sentiment within the state leans towards pessimism. This sentiment is further fueled by a substantial $60 billion investment in semiconductor manufacturing facilities, a highlight for the Biden administration.

Despite these developments, polling reveals a sense of economic dissatisfaction among voters, with more than half of Arizona's electorate describing the economic conditions as "poor" and an additional quarter as "fair," according to a survey conducted by The New York Times/Siena College in battleground states last year. This widespread economic discontent poses a threat to President Biden's re-election prospects.  

National surveys conducted in February have shown that while opinions on the economy have slightly improved, views on President Biden's performance have deteriorated. An overwhelming majority, over 90% of respondents who perceive the economy as poor or just fair, also hold a negative perception of the housing market. In response, President Biden has put forward initiatives aimed at making home purchasing more affordable and encouraging the building of budget-friendly housing options.

Arizona serves as a prime example of the housing crisis. The appealing suburban lifestyle and clear skies have driven the population of the Phoenix area up from 4.2 million to five million over the last decade, as per census figures. This surge has consistently driven up housing prices.

Concurrently, obstacles such as development restrictions, communal resistance to expansion, and significant interruptions in the building material supply chain have hampered new housing constructions. This issue is particularly acute for households with lower incomes, which operate on slim profit margins and often rely on financial assistance.

Since 2010, the availability of rental properties priced at $1,000 or less in the greater Phoenix area has plummeted by 86%, reports the Maricopa Association of Governments, a regional planning body. Similarly, the number of homes selling for $300,000 or less has decreased by 73%.  

The affordable housing that once dominated the market has all but disappeared, according to Amy St. Peter, the deputy executive director of the agency. What was once commonplace is now nearly extinct.

The scarcity of affordable homes has led to a significant crisis for lower-income families, resulting in a sharp increase in evictions, homelessness, and a general sense of desperation. This housing crisis extends beyond those of modest means, affecting even the more affluent segments of society. The rising cost of home ownership has young professionals, even those with substantial incomes, taking on additional jobs and tolerating longer commutes to afford housing.

Real estate professionals, typically known for their optimism, are experiencing a pervasive sense of helplessness. Nathan Claiborn, a real estate agent from Carin Nguyen Real Estate in the Phoenix area, points out that individuals earning between $45,000 and $90,000 annually find it increasingly difficult to afford a home. This reality contributes to a broader perception that the economy is struggling, with the issue of housing affordability casting a shadow over many, creating a widespread psychological burden.  

The city of Phoenix, Arizona has been grappling with a rising housing affordability crisis. The city's skyrocketing housing prices have made it increasingly difficult for residents, particularly low- and middle-income earners, to afford decent housing. The situation has become so dire that even teachers, firefighters, and police officers are struggling to find affordable housing.

The city's housing affordability crisis can be traced back to its rapid population growth and subsequent housing market boom in the early 2000s. Developers took advantage of the available land and sold homes at discount prices, marketing them as an affordable alternative to the expensive housing markets in neighboring California. However, as the housing market boom subsided, the reckoning began, and a wave of foreclosures followed. Local communities imposed restrictions on development, but the population continued to grow, especially during the pandemic, as professionals working from home sought larger properties in distant suburbs.

Despite the efforts to increase the density of neighborhoods by adding apartments at subsidized rates, most of the available land in Phoenix and its surrounding suburbs is zoned for single-family homes. Community activists have used social media to raise concerns about the prospect of affordable housing projects, warning of rising crime and diminished property values. However, as Devon Lawrence, a resident, pointed out, the solution lies in providing homes for essential workers such as firefighters, teachers, and police officers, who are struggling to find affordable housing.

In conclusion, the housing affordability crisis in Phoenix is a complex issue that involves a range of factors, including population growth, housing market fluctuations, and zoning regulations. While there are no easy solutions, increasing the density of neighborhoods and providing affordable housing options for essential workers are important steps toward addressing the crisis. By working together, we can create a more sustainable and equitable housing market for all.  

Constable McCloskey, known to his fellow municipal officials as "Lock 'em Out Lennie," spends a considerable amount of his time evicting tenants who have fallen behind on their rent. In the Phoenix metro area, landlords filed 83,000 evictions last year, the highest total since 2005, reflecting the ending of a pandemic-era moratorium on evictions. As he conducts his rounds, Constable McCloskey explains to the tenants that they have to leave, as their agreement to rent the property is just that – an agreement – and they did not fulfill their obligations. He is jovial and counsels the people not to lose hope even as they scramble to pack their belongings in the minutes he allots before ordering them out.

On a recent morning, Constable McCloskey was tasked with rousting a half-dozen squatters from a dilapidated home littered with drug paraphernalia, unwashed dishes, and a mostly eaten birthday sheet cake. He then drove to an apartment complex in Glendale, where he removed Leebert George Brown, 35, from his one-bedroom apartment. Mr. Brown's apartment was spotless, its white countertops glistening, and he had lived there since August when he moved to Phoenix from his native Florida in pursuit of work as a plumber. However, his application had been held up, and he was driving for Uber and working nights at an Amazon warehouse, where he earned $17.63 an hour. Despite his best efforts, he was falling behind and struggling to make ends meet, while also sending money to his mother, who suffered seizures.

As the constable arrived, Mr. Brown had packed most of his belongings, including his clothes, high school diploma, and personal finance books. As a maintenance man changed the locks, Mr. Brown grabbed his work boots, which he would need for his shift at Amazon in less than five hours. When the constable held the door for him, Mr. Brown thanked him for his cooperation, and the constable replied, "Sorry it took me so long." Mr. Brown simply shrugged and left.  

  Sure, here is a rewritten version of the text in a more formal and professional tone:

It is unfortunate to hear that the individual in question has been unable to find adequate housing solutions despite their financial means. As a nonprofit organization operating in downtown Phoenix, Keys to Change has sadly grown accustomed to individuals presenting with problems such as addiction and domestic violence. Those in need of shelter have increasingly found themselves exhausting assistance from friends and relatives, and even wealthier individuals are facing compromises that have undermined their faith in the economic system.

Alexandra McDaniel, a 29-year-old resident of Scottsdale, had hoped to find a home close to her parents and near her workplace as a fashion retailer. Her fiancé, Cameron Smith, a 32-year-old data analyst at Amazon, aimed to find a safe area for Ms. McDaniel to walk their dog alone at night. With a combined annual income of approximately $200,000, the pair believed they could afford to pay around $550,000 for a home. However, during a recent meeting with their Realtor, Curt Johnson, a map projection revealed that their expectations would need to be downgraded.  

  Certainly! Here are some rewritten responses to the given text in a detailed and point-wise manner, without using the phrase "I apologize" or any suggestion of inadequacy:

 Response to the context:

Mr. Johnson's search for houses with small pools and at least three bedrooms in a budget of $475,000 to $575,000 yielded no results in Scottsdale. He found six properties, but they were scattered 15 miles away, beyond the freeway, and included a higher crime area.

 Mr. Johnson's comment on the neighborhood:

Mr. Johnson observed that the neighborhoods he showed the couple were lower-income areas with higher crime rates. He highlighted the limitations of these areas and the need to balance affordability with safety and quality of life.

Ms. McDaniel's perspective on the situation:

Ms. McDaniel acknowledged their successful jobs but expressed frustration that their search for a home was not yielding the desired results. She emphasized the importance of finding a suitable dwelling that meets their needs and aligns with their budget.

 The challenge faced by the couple:

The couple faced a challenging situation, balancing their job requirements with their need for a suitable home. They were finding it difficult to locate a property within their budget and with the necessary features, such as a small pool and multiple bedrooms.

 The impact of the search on their lives:

The couple's inability to find a suitable dwelling was affecting their quality of life and work-life balance. They were feeling frustrated and concerned about their future living arrangements.

Suggestions for solving the problem:

Mr. Johnson and Ms. McDaniel could consider expanding their search to nearby areas or compromising on certain features to fit their budget. They could also explore alternative housing options, such as apartments or condominiums, that offer more affordable prices and amenities.

The importance of innovative thinking:

Innovative thinking and creative problem-solving are essential in finding a suitable solution to the couple's housing dilemma. By considering new perspectives and alternative approaches, Mr. Johnson and Ms. McDaniel can find a dwelling that meets their needs and aligns with their budget and lifestyle preferences.

The value of detailed planning:

Detailed planning and research are crucial in the home-buying process. Mr. Johnson and Ms. McDaniel should conduct thorough research on the neighborhoods and properties they are interested in, factoring in their budget, lifestyle, and safety concerns. By being well-informed and strategic in their approach, they can make more effective decisions and find a dwelling that meets their needs.

The impact of neighborhood characteristics on daily life:

The neighborhood's characteristics can significantly impact one's quality of life. Mr. Johnson and Ms. McDaniel should consider the safety, amenities, and proximity to work and other important locations when selecting a dwelling. A suitable neighborhood can enhance their daily life and overall well-being.

The importance of proactivity in real estate decisions:

Proactivity is essential in real estate decisions, and Mr. Johnson and Ms. McDaniel should take an active role in their search. By being proactive and persistent in their search, they can identify suitable properties and avoid potential pitfalls.

The significance of balancing work and personal life:

Balancing work and personal life is critical, and Mr. Johnson and Ms. McDaniel should consider this factor when evaluating their housing options. A suitable dwelling can help them maintain a healthy work-life balance and improve their overall well-being.

The potential of alternative housing options:

Alternative housing options, such as apartments or condominiums, may offer more affordable prices and amenities for Mr. Johnson and Ms. McDaniel. They should consider exploring these options and assessing their suitability based on their needs and preferences.

 The value of collaboration in home buying:

Collaboration and communication are essential in the home-buying process. Mr. Johnson and Ms. McDaniel should work together and engage in open communication to identify their needs, preferences, and concerns. By collaborating effectively, they can make more informed decisions and find a dwelling that meets their needs.

 The impact of neighborhood reputation on daily life:

The neighborhood's reputation can significantly affect one's daily life. Mr. Johnson and Ms. McDaniel should research the neighborhood's reputation and assess its impact on their quality of life. A suitable neighborhood  

Buying a house just doesn’t feel possible right now.

Home prices have doubled in the last decade, with much of that growth happening in just the last four years. By one measure, housing affordability has fallen to its lowest level since the 1980s. And high-interest rates have exacerbated the problem, ballooning monthly mortgage payments.

But it’s not easier on the other side of the equation. Would-be sellers — grappling with those same high-interest rates — are locked into homes that may be too small for their growing families. Parents with newly empty nests would rather stay put than pay the same amount or more for a smaller home.

The result: The pandemic-era housing boom is over. Home sales in 2023 were the lowest they’ve been in nearly 30 years.

“The housing market is pretty frozen in place,” the Wall Street Journal’s housing reporter Nicole Friedman told Today, Explained co-host Noel King“There’s really kind of a standoff right now between buyers and sellers.”

So how did the housing market go from frenzy to frozen in just a few years? And what might turn the heat back on?

What follows is the transcript of a conversation between King and Friedman, edited for length and clarity. —Amanda Lewellyn, producer

Noel King

Nicole, we have a very young audience, and I want you to tell us about something that I never knew about — or I never realized at all — until I got a mortgage when I was 40, which is that interest rates actually mean something. So if I don’t know about mortgages, I might think 3 percent or 7 percent. That’s not a big deal. What does an interest rate, a higher interest rate, actually mean for a person getting a 3 percent and a person getting a 7 percent?

Nicole Friedman

So that type of change in interest rate is a huge difference in terms of the monthly payment. At a 3 percent interest rate versus a 7 percent rate, that can be a difference of hundreds of dollars — even maybe a $1,000 difference — in what you’re paying every single month. And so that’s really, for many people, the difference between being able to buy a home or not, or being able to buy a home of a certain size or in a certain neighborhood versus not being able to afford it.

Noel King

Right. Also, it’s not like you get a raise because interest rates have gone up. It’s not like any other part of your budget, or your life, gets better to account for interest rates going up.

Nicole Friedman

Absolutely. And that’s why we talk a lot about affordability, right? Homebuying affordability or housebuying power. The way that economists think about homebuying affordability usually is a combination of the price of the house, the mortgage rate, and income. So it’s really, what is that monthly payment going to be? And then, how much of your income does it take to pay that monthly payment?

The benchmark for “affordable” is that you really shouldn’t be spending more than 30 percent of your income on your housing payment. One index that tracks housing affordability from the National Association of Realtors shows that in October, homebuying affordability fell to the lowest level since the ’80s.

So even though there are times in the past when mortgage rates have been much higher than they are today, it’s really the combination of rates and prices and incomes that means that affordability is still worse.

Noel King

Okay, so there’s a third piece of this that is also super interesting, which is: If interest rates are high and fewer people are buying, it seems like that should mean the people selling have got to lower the prices of the houses. You have fewer buyers. “Okay, we have to compromise. We’re just going to make less money on this house.”

And yet, I haven’t seen many stories saying home prices in America are super low since interest rates went up and the competition waned. What is that about?

Nicole Friedman

We think about just classic economics. There are two things in setting a price: There’s demand and there’s supply.

The thing about higher mortgage rates and the fact that they rose as quickly as they did in 2022 — it really lowered demand. A lot of buyers stepped out of the market, but the increase in mortgage rates also lowered supply; a lot of home sellers are also buyers. There are people who are going to sell a home so that they can buy a home.

And these people said, “Wait a minute. [In] my current home, I have a great mortgage rate. I have a 3 percent rate. I have a low payment. If I go back out onto the market, I’m paying a higher price for that home because prices have risen in the last couple of years and I’m paying a higher mortgage rate. I cannot afford to sell my home and buy a different one. I’m just going to stay put.”

That means that the supply of homes for sale is much, much lower than normal. Any buyer who’s out on the market right now is probably noticing that there’s not a lot of inventory to choose from.

That means that even though demand is down, supply is down, too. So prices really haven’t declined in most of the country.

Noel King

Nicole, crazy question. Are there enough houses?

Nicole Friedman

Everybody basically agrees there are not enough homes, because after the financial crisis, a lot of homebuilders went out of business. The ones who were left in business were really, really financially scarred by the crisis. They were left with a lot of homes they couldn’t sell and a lot of land they couldn’t sell. So builders became a lot more cautious, and the number of homes being built fell to a much lower level. It’s taken more than a decade for homebuilding activity to really catch back up.

Noel King

The baby boomer generation gets a lot of crap for buying the seven-bedroom house with the big backyard for seven raspberries and 40 years later, still sitting on the house. Are the boomers — God bless them, every one — are they really part of the problem, or should we leave the boomers alone?

Nicole Friedman

Well, every boomer would tell you that they bought it for seven raspberries, but at a 15 percent mortgage rate. I don’t think that boomers are the problem here. It is a change from past generations that the baby boomer generation is aging in place more than past generations, and they are often working longer. They’re staying healthier longer. And so they can stay in their homes for longer, and that’s their choice. That’s fine. But it does mean that the typical cycle of how long somebody normally stays in their home before they sell it has gotten longer.

People are staying in their homes for longer, and that does contribute to less turnover on this ladder of how people move through the housing market. Normally, you buy a starter home and then you move up to a bigger home and maybe eventually you downsize to a smaller home. That ladder gets a little jammed up if people don’t move as frequently.

But I would also say, what’s really jamming up the gears right now are those move-up buyers. That’s going to be Generation X. These are people that are in starter homes that they bought within the last five, 10 years, and they’re looking for that next move up. There may be a young family who bought a home before they had kids — or when they had just one kid, and now they have a second child and they need another bedroom — and they want a bigger home.

But those people are saying, “I can’t give up this 3 percent mortgage rate,” even though, in this “natural” cycle, they should be selling their starter home to a first-time buyer and moving into a bigger home that’s being vacated by a downsizing baby boomer. But those people are so stuck in place that they just can’t afford to make that move. Arguably, they’re really the ones right now kind of jamming up the gears.

Noel King

Americans are made to feel like we should buy houses. We hear all about the benefits. We hear much less about the drawbacks.

What does it mean that it is starting to feel less and less accessible? This thing that once upon a time and for a long time was considered to be part of the American Dream, and now there’s an entire generation — millennials, and Gen Z hot on our heels — who feel like it just might never happen?

Nicole Friedman

Yeah, I think it does feel frustrating to people. People do want to own homes, by and large. There was a theory once upon a time that millennials didn’t want to own homes. I think that’s been proven wrong.

Noel King

We were just broke! We were just broke when they were saying that about us.

Nicole Friedman

Exactly. And it’s now very clear that millennials are like prior generations. They do want to own homes.

Partly it is a financial investment: Homeownership is a key way to build wealth and has been, in this country, an important way to build wealth. But it’s also a very emotional thing. A lot of people want stability. They want a sense of ownership. They want to be able to paint their walls and redecorate their house, and they don’t want to worry about the rent going up, or about their landlord deciding to sell the building and them not being able to stay.

Right now, that gap between what it costs to rent and what it costs to own in a lot of places is pretty out of whack. It’s just much more expensive to buy right now than it typically is. And I think that people are realizing that and trying to come to terms with what it means.

But it’s also a bigger question as a society, how much we want to prioritize homeownership and homebuying affordability.

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