America has begun to fall into another housing crisis — even before fully recovering from the last one.
Despite positive trends, none of the key housing measures have returned to normal, pre-rescession levels, pushing the nation toward a deep economic shift, writes CityLab, a publication by The Atlantic.
And there are several big red flags that point to history repeating itself.
Existing home sales are still only 80% of the way back to normal, while home prices are stuck at 75% back, remaining undervalued by 3.4%. Furthermore, new construction is less than halfway (49%) back to normal.
In addition, Americans continue to overspend on housing, as homeowners spent more than 33% of their income on housing in 2013, up nearly 13% from two decades ago.
“The result, of course, is that more and more American households, especially middle- and working-class people, are having a harder time affording housing,” the article states.
Finally, the rate of homeownership continues to fall — and dramatically. Homeownership has reached its lowest level in two decades (64.4%) as of the third quarter of 2014, according to the U.S. Census Bureau.
Homeownership currently hovers from the mid-50 to low-60 percent range in some of the most highly productive metros in this country, including places like San Francisco, New York and Los Angeles.
“What we are going through is much more than a generational shift or simple lifestyle change. It’s a deep economic shift — I’ve called it the Great Reset,” Richard Florida writes in his article.
This Great Reset entails a shift away from the economic system, population patterns and geographic layout of the old suburban growth model, which was deeply connected to old industrial economy, toward a new kind of denser, urban growth more in line with today’s knowledge economy.
So a shift away from homeownership might not be the worse thing to happen to the economy, but this shift must be understood by government regulators, the article notes.
This past weekend, Peter J. Wallison pointed out in a New York Times op-ed that federal regulators moved back off tougher mortgage underwriting standards brought on by 2010’s Dodd-Frank Act and, instead, relaxed them. While regulators are hoping to encourage more homeownership, they could be recreating the conditions that led to 2008’s crash.
“It’s time to impose stricter underwriting standards and encourage the dense, mixed-use, more flexible housing options that the knowledge economy requires,” Florida writes.
To read the full article, click here.
Written by Emily Study