I’ve been saying for a year now. If the average age of a first home buyer is still 40 years old in 2028, you can say hello to President AOC or Kamala, because will we get our butts handed to us. If I asked a bunch of housing professionals, be they realtors, builders, lenders, or journalists who have been following the issue, as to why homes are priced so high, I’d get a bunch of different answers. And they’d all have a certain amount of validity. It’s a perfect storm and as of today, very little has been done to solve any of the problems affecting the number one “affordability” issue; which is housing.
Interest Rates – Buying a home for $350,000 (with 5% down) at 6.68% gives a buyer a $2141 monthly payment. That does not include property taxes, insurance, etc. The payment drops to $1720 with a 4.68% rate.
Supply of Starter Homes – They haven’t built a “starter home” in perhaps 50 or 60 years. If you can find a smaller home, it’s usually in an area like Milwaukee where the property tax mill rate is over $28 per 1000! (Compared to a city like Tomah, which is $7 per 1000).
Property Taxes – The school referendum process is a sham, and the funding formula is built for shear fraud. Voters are buying into the “it’s for the kids” nonsense while the school system sends home glossy flyer after glossy flyer describing the horrors that will occur if you don’t vote yes on another huge chunk of school spending. The operational referendums are forever. It’s another $25 million (or whatever the amount) each year over the levy limit, forever. Forever, no matter what! If the state gives a record amount to the school funding formula the district in question STILL gets the extra amount. Forever. Schools right now are getting record funding and yet they STILL ask for (and many times they get) more money. It will never be enough. And yes, schools for the most part are driving the property tax crisis.
Large Financial Giants Buying Single Family homes – Tom Tiffany in his “Breakfast with the Tiffany’s” commercial says he’s going to prevent large institutional or foreign investors from purchasing single-family residential properties. There is no doubt that these companies are driving up the price of these homes. NOTE: Tiffany also cites property taxes and regulations as causes for high home prices. He has promised action on these items as well.
Regulations – Several builders in Wisconsin tell me that the price of each new home built includes close to $100K in regulations. My GOODNESS!!! That is not a TYPO! And that figure comes from multiple sources. Of course, not a thing is being done about it. As of now anyway.
Illegal Immigrants – Ahh. Finally, an affordability issue that someone is doing something about!!! God Bless our president! Economists say that the illegal invasion has driven the cost of housing up by 30%. That turns a $290,000 home into a $377,000 home. The markets are slowing, but so far, no significant decline in home prices has occurred.
Cost of Building Materials and Labor – There is no doubt that raw materials and labor are huge factors in any industry, but especially in housing and construction. We’ve been talking about getting our young people into the trades for tears, but like everything else, we function by committee and education has been slow to adapt. The knock-on education is that if you woke up 100 years from now, everything would have changed except public education. The cost of materials is also driving the price of new homes upward. The reasons are many, corporate consolidation, covid shutdowns, and increased regulations. Tariffs always seem to be touted as a reason but like everything else, prices are not rising under Trump’s “tariffs” and as a matter of fact, inflation is almost as low in Trump’s second term as it was in his first. Sorry, facts matter.
Stay Tuned!
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