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The Biden Economy Could Destroy Home Ownership for an Entire Generation

Posted on Tuesday, August 9, 2022
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by Andrew Abbott
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AMAC Exclusive – By Andrew Abbott

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After almost two years of record sales and skyrocketing prices, America’s hot housing market looks to be cooling off. But even as home prices drop, rising interest rates are continuing to drive monthly mortgage payments higher, and many potential buyers now face the threat of being financially locked out of homebuying entirely.

In June, the median price for an existing home hit $416,000, up 13.4% on the year and the highest figure since records began in 1999. However, actual home sales fell 5.4%, the fifth straight month of declining sales. Homebuying sites like Realtor.com and Redfin are also reporting that many sellers have been forced to cut prices as homes remain on the market longer and longer. Daryl Fairweather, chief economist at Redfin, told the Wall Street Journal last week that “the days of bidding wars and homes selling for tens of thousands of dollars over asking are over.”

But even as sale prices decrease, buyers aren’t getting a better deal. As the Fed hikes interest rates to desperately try to curb inflation, monthly mortgage payments are now 60% higher than they were just a year ago.

For many would-be first-time homeowners, this means their dream remains just out of reach – particularly as inflation and the ongoing recession threaten the financial stability of many families. Though home prices increased more than 14% between June of 2021 and June of 2022, real wages decreased 3.6% in that same period. With experts predicting that inflation will continue to be a problem for the foreseeable future and average monthly mortgage payments continuing to rise, it seems likely that buying a home will become more difficult in the months ahead, even if prices come down.

The roots of this burgeoning crisis go back to early 2020, when the appetite for homebuying exploded throughout the country. A combination of remote work options, limited social gatherings, and historically low mortgage rates incentivized millions to enter the market. Stimulus checks from the government also helped many Americans save for a down payment on a home.

At the same time, strained global supply chains meant that the price of everything from wood to concrete increased dramatically. According to NPR, “The futures price of lumber in March 2020 was $303.40 per thousand board feet. That cost more than quintupled over the following 14 months, reaching a high of $1,607.50 this May.” Many companies that once supplied homebuilders went out of business entirely, putting even more strain on those suppliers who remained.

This combination of factors drove prices to record highs. Between the onset of the pandemic and the record high in prices seen this summer, prices increased about 44%.

The pivot point to avoid the current looming crisis came in early 2021, as the pandemic began to recede and many states eased restrictions. If at this point Biden had prioritized bolstering supply chains and restoring economic stability, it is likely that prices would have begun to cool slightly while sales remained steady.

Instead, Biden worked with Democrats in Congress to pass the $1.9 trillion American Rescue Plan and the $1.2 trillion infrastructure bill, fueling an inflation fire that has now grown out of control. With the country now in an apparent recession, it’s likely that the Fed will have to continue raising interest rates to combat inflation, with some experts predicting that rates could reach 6.7% by 2023 and 8% by 2025. If current developments are any indication, such a dramatic rise in rates would be catastrophic for the buying market, and would force many Americans to remain renters rather than owners.

In addition to many Americans being unable to afford homes, the real threat now is that the country may face a housing bubble similar to what occurred in 2008. While the 2022 housing market is different in some ways from 2008, the consistently overlooked fundamentals of economics paint a stark picture. Demand will decrease as more Americans are priced out of the market by high prices, mortgage rates, and inflation. There will likely also be some “demand destruction” as a significant minority turn away from homebuying completely. Thus, demand will fall along with housing prices. Just as home prices cool, a glut of new housing developments, delayed by COVID or inspired by the hot market in 2020 and 2021, will be completed, further increasing supply and dropping prices.

This would be great news for aspiring homebuyers. But just as the country saw in 2008, a massive surge in supply is bad news for the economy as a whole if no one can afford the homes available. This may yet deepen the recession the country already finds itself in, destroying hopes of owning a home for millions of young families. Avoiding such a scenario is critical in preserving the promise of the American Dream for future generations.

Andrew Abbott is the pen name of a writer and public affairs consultant with over a decade of experience in DC at the intersection of politics and culture.

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James J
James J
1 year ago

Pedophile Cognitive Retarded Joe and his Communist Demonrats are Destroying the United States, and we do NOthing.. Wait for some midterm election, incredibly ignorant. If someone was harming a family member would you Wait ? Sure Looks like it !!!!! housing is the very Least of the problem. You Need a Country to have a House.. Complacent People!!!

Michael J
Michael J
1 year ago

Welcome to the return of serfdom. These vipers know exactly what they are doing. Destroying America one bill, or should I say multiple ones right under their constituents noses. These
tyrants have to go.

Paul W
Paul W
1 year ago

“The Biden Economy Could Destroy Home Ownership for an Entire Generation” Yeah…and a LOT more than that; it could destroy this entire nation…possibly FOREVER!

mark
mark
1 year ago

The Socialist DemocRats are not stupid ,, lets starve and take away there homes and then give them a few crumbs to make the happy while we tax the hell out of them ,,, its been happening for years and WE THE PEOPLE are just starting to see it ,,, they will keep taking until there is nothing else to give and they will ask for more ,,, its called complete rule of the people and how to kill a free nation ,,, we must vote people ,,, PLEASE …

Mary
Mary
1 year ago

Vote Republican just to get our rights and freedom back…it is the only way to save this country…President Trump was spot on about so much! MAGA 2024

Philip Hammersley
Philip Hammersley
1 year ago

With high home prices coupled with increasing interest rates, people will be squeezed. We could have another colossal flop like 2008 when policies started by Peanut Brain, led to a collapse!

Dr Rene
Dr Rene
1 year ago

Democrats ONE-WORLD-ORDER policy says individuals have no right HOME Ownership & PRIVATELY-OWNED Vehicles.

Both are reserved to the rich & elites along with their lemos and private jets.

Rik
Rik
1 year ago

Living under Communism breeds ONLY 1 thing, there will no longer be a Middle Class! Just Rich and Poor, with 95% of the People being Poor! . . . Do as the Government says or be punished!
No thanks, I’ll go down fighting then!

John Riley
John Riley
1 year ago

Just another step on the journey to becoming a 3rd world s**t hole.

Honey
Honey
1 year ago

And wait until the Obama/Biden plan to change the zoning in the suburbs hits us. They will build high rise apartments for the poor and all suburban homes will go down in value and they will destroy those communities.

Arlene
Arlene
1 year ago

Everyone needs to write to their Representatives to vote NO on this horrible Inflation Reduction Act! It will ruin us!

Swedesmith
Swedesmith
1 year ago

Owning a home is racist.

Ed J
Ed J
1 year ago

Ah, YES! Twilight Zone Joe Bidense, AKA POTUS in Wonderland!  Our very own King Midas in reverse – everything he touches turns to crap! Can anyone name anything that has been positive with this Administration? Of course not since the Demsheviks are ideologically committed to their motto, “We will snatch defeat out of the jaws of victory!”

The sad part is that they actually relish their perceived “accomplishments” and continuously apply copious numbers of self-applied kissing hickeys up and down the inside of their arms, supplemented with a generous number of contusions on their shoulders and upper backs administered by repetitive self-applied pats on their own backs.

Patriot Will
Patriot Will
1 year ago

It is very sad that Biden and his handlers are making it harder and harder for people to buy their own homes. However, the fact that Biden and his henchmen are totally destroying our Constitutional Republic is truly tragic. It’s hard to comprehend how quickly and completely the Biden administration is moving our country to be a second rate power. If Red China has its way, we will soon not even recognize this country as a world force for good, and our citizens will be miserable and enslaved.

BwaHa
BwaHa
1 year ago

Yeah, welcome to biden’s and the rest of this country’s liberals chaotic, hapless, destructive politics. There is no real governance… IMHO. Just beaucoup bucks being paid out by Biden’s minions to appease his handlers. IMHO

WE NEED TERM LIMITS FOR ALL OF OUR POLITICOS!

IMHO

MAGA2024! TRUMP2024!
FJB! LET’S GO BRANDON!

BAE
BAE
1 year ago

Our government is so corrupt, I don’t know what to say or think anymore. Our democrat leaders are disgusting! I have NO faith in our government.

Pat
Pat
1 year ago

The more I learn & understand what’s happening, the more I feel as if I’m living in a banana republic!

Becky
Becky
1 year ago

America must die in order for Global Communism to be instituted. The plan by the elite filth really is just that simple. And it’s been underway since 1960.
Either we patriots stop this communism or we lose this country. First two orders of business: deport all illegal aliens, and ALL their offspring.
Try for Treason almost all current politicians and begin the hangings and firing squads.
It’s them or us.

edward
edward
1 year ago

the soviet union didn’t allow home ownership either. ALL housing(apts/houses, etc) were owned by the state. only well connected party apparatchiks actually lived in actual homes, everyone else was stuck in state owned apartments that were very poor quality, again unless you were a party apparatchik, in which case you got nice digs if you didn’t want actual house.

Larry Wilkens
Larry Wilkens
1 year ago

Crash the enonomy so home prices drop because interest rates jump higher. That will slow down housing, right?

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