TRACING THE DISCONNECT IN THE AFFORDABILITY CRISIS IN AMERICA: HOMEBUILDERS FACE RISING COSTS AND SLOWER SUPPLY CHAINS DUE TO COVID-19
T
he Coronavirus pandemic has not only affected the health of Americans but also their livelihoods. While primary sectors in the economy such as transportation, health, agriculture have been dealt a huge blow, the housing market has not been spared from the crisis. The pandemic has hit several citizens hard, making it difficult for them to pay up even the main bills such as utilities, rent, internet access, and other varieties.
Since homebuilders do not have the opportunity to build a house, there is a shortage in supply while demand multiplies. In the meantime, demand will exceed supply which will lead to a scarcity of rental homes. Frankly, this is the perfect time for landlords to make a fortune. It is simple economics: whenever demand exceeds supply, price steps up. Therefore homeowners will pass higher prices to the rentals, which will worsen the affordability crisis.
The measures against the spread of coronavirus in the USA have a far-reaching impact on the economy, which affects the housing market. Despite the high demand for houses and low-interest rates, it’s a watershed moment for homebuilders because of the low supply and rising cost of materials, unavailability of laborers, and inadequate supply of lumber and other building materials, which has added thousands of dollars to the construction of houses. These obstacles have deprived the homebuilders of the advantage of enjoying this spring home buying. Then how does this affect affordability?
Notable figures have commented on this crisis, and their comments are reported below.
123rf.com
The head economist, Ali Wolf, at housing market data tracker Zonda Economics predicts that home sales will be 5% greater than the previous year (2020). That indicates a tremendous fall in the growth rate from the 20% increase carried forward from 2019. Ali Wolf later added that ”if more houses had been built, more home sales would have been possible.” That means that home sales are positively related to its availability.
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THE POWER IS NOW MAGAZINE | APRIL 2021
