Alabama's Morning News with JT
Erin Real talks housing costs and economic futures
And of course, what an air in reality on the housing cause continuing to soar out there. Aaron, welcome in. Thanks for being here this morning. Thanks for having me, JT. Love chatting with you every day. It's my highlight. It's one of mine as well. Thank you so much. And I was looking at some of this with some real estate friends of mine and I'm like, my gosh, the prices on the homes aren't dropping at all to accommodate, you know, the interest rates climbing and the low inventory out there. They seem to just be holding or even rising now. So with the crunch on it and so much demand and inventory low and rates high. What's driving this beast? Who honestly is supply. If you had to give it like one thing, there's a, there's a couple of reasons, but supply is really what's leading this. So what we know is that price is in April. They're up. They're up 6.3%. Home prices are now 47% higher than they were in 2020. 47% higher median sale price is now five times the median household income. I'm going to repeat that median sale price five times more than the median household income. This is blocking a tremendous amount of people out of the market. They're just, they cannot possibly afford to buy a home and then you see this increase in insurance premiums as well. So if you own a home, those are up about 21% property taxes are up. They're also rising. This is the least affordable housing market in US history. Yeah. I would think that, you know, with the inventory being tight, I get, yeah, there's only somebody to choose from. So, hey, you know, if you want this, you got to pay a little bit more. I get it. But with everybody slowing down and less people getting out there to purchase because it's so tough with the interest rates and the cost and the value of those homes, that it would start tipping the scales a little bit the other direction. You would think, but it's not just own homeownership. It's rentals, too. So renters are seeing prices that are 26% higher than they were in 2020. And half of all renting households, which by the way is 22 million, it's really high. They spend more than 30% of their income on housing. That's considered a cost burden. And then 12 million of those households, so not peanuts, almost half, spend more than half their income on rent. You're supposed to spend like at most 20%. Yeah. That's what it's supposed to be. I looked at that before, and everybody told me when it came time for me looking at my first home, you know, no more than 25% all right. Don't go higher than that. You're going to be house poor. So, you know, stay away from anything higher than 25%, which worked back in the day. But now, my gosh, if you've got to put that much of your paycheck into housing, something's wrong with this. By the way, speaking of the economy, I mean, depending on who you ask, you know, you got these people on the sideline when the Fed starts talking about interest rates and where we are with a 2% number that Jerome Powell wants to hit, and we haven't gotten there. And everybody says, "Oh, yeah, we're about to see rate decreasing." And he's like, "Well, I don't know where you're getting this people, you know, calm down. We're not moving that fast, and we may not see one for quite some time." So, there is a portion of people out there that, and talking economists that think we're doing okay and things are coming back. And then it seems to me there's the reality side of it coming from the Fed. It's like, hold on a minute now, we're still having trouble with inflation. So, I mean, what's going on where people have negative feelings about the economy despite some of the positive news? So, they gave it a cute name, which is kind of frustrating. They're calling it a vibe session. I'm like, no, this is not groovy. This is a descriptor for the disconnect between the economy's overall strength and then the weakness that each household is feeling. So, they're not lying to us with the data. We are doing what we're close to full employment. Our GDP is strong. Our currency is strong, but at the same time, more than half, 55 percent of Americans say that they're optimistic about their household finances, and that's because we've seen cooling inflation data and that strong job market that's really holding this all together, to be honest. If the minute the jobs dry up, then we're in recession. But whether it's filling your tank, making that rent payment, buying groceries, consumers are paying more today than they ever have in their entire existence. Many are using credit cards to make those purchases, and because the Fed has been upping rates 11 rate hikes since 2022, the average credit card charge is now 21 percent interest on that average credit card charge. This is not sustainable, and also, here's the thing, it's widened the wealth gap. If you're a homeowner or if you have financial assets, you've done very well, but you're leaving out a huge segment of the population, and one third of the population is left out of that. One third. That's a big problem. Yeah, I don't understand how some people feel. The economy is bouncing back, and it's not as bad as some people are portraying it to be. I don't think those perceptions will change, or reality will start to bend until we start seeing the housing values steady or come back a little bit, the rates come back a little bit. You're right, filling up your tank and going to the grocery store these days, you know, it's still alarming to me when I leave in the checkout line that I'm thinking I'm spending 60 bucks, and all of a sudden it's $160, I'm like, still going on, I see you there, right here, and thank you so much.