Open Forum

Warning - this gets passionate and touches on a lot of issues. This is not directed at the original poster or any one who has or will comment specifically.

Is it in the best interests? From a purely capitalistic perspective - absolutely not. As title agents, it is the same amount of work to clear title and close on 123 Main St no matter if the sale price is $200k or $900k. Title premiums are tied to sale price to reflect assumed risk on the part of the underwriter, not to reflect amount of work done by the agent. Realtor income as a percentage of the sale price - I don't know any actual history as to how this came to be, but logically speaking, it provides an incentive for a seller's agent to negotiate the best price possible for their client and "sales commissions" more broadly speaking have historically been based on a % of the sale. Lenders always benefit from higher prices and higher interest rates because, like title, the amount of manhours they invest in a transaction is not related to the sale price.

From a professional ethics perspective - should we as ethical professionals who advocate for the good of our customers, even if it hurts us. Well, ethically speaking, probably. 

From a societal perspective - As people, who have to live here, buy homes here, have children that maybe we'd like to get our of basements? Definitely.

I don't think it's really a question of should housing affordability be addressed? Of course it should be. Homelessness does not benefit the people, governments or businesses that make up a society.

I think the better question is how should housing affordability be addressed?

It's not by strong arming entire industries into lower profit margins. (Including the proposed idea of forcing lenders to allow assumptions.)

It's not by knocking a nominal couple hundred dollars off the closing costs at settlement - no matter who's pocket you take them out of. 

Those things don't solve any problems. They are band-aids for severed arteries. Just let us all die in peace at that point. I have better things to use my last breathe on.

Housing Affordability is a phrase that automatically points people in the wrong direction to solving the problem. Price is a symptom, not a cause.

If you want to fix the problem, you have to address the cause.

Are high interest rates influencing supply? Sure. But that's the easy one to point the finger at. Why are the interest rates high to begin with? OR for that matter, how do we define high? I'm a little young for this, but I've never heard anyone complain about inventory problems in the real estate market when interest rates were in the double digits in the eighties. My mom bought her first house in 1987 with an 11% interest rate. That very same house sold for more than double the price 11 years later and that price more than doubled again in the next 10 years. Do you know what did not double during each of those decades? Wages. I bought my first house in 2003. It was half the size of that house I grew up in. It was a townhouse, not a single family. It was in the middle of no-where, over an hour from where I grew up. And I paid almost twice what my mom paid in 1987 for the home I grew up in. I was earning $4k less per year than she was in 1987 even though we were working comparable white collar jobs for wage comparison purposes.

So is the answer that we address wages? Nope. Not good enough. We have to dig even deeper. It's still a symptom, not a cause of the problem.

Wages have stagnated. Why have wages stagnated? Because corporations adopted a new perspective on how to run their businesses. There used to be a belief that businesses were indebted to the society they profited from and moreover, the people who worked for them. They believed their number one stakeholder was their employee. This belief is what gave us on the job training, retirement and pension plans, employer paid healthcare and more. Then came Jack Welsh. CEO of General Electric starting in 1981. He is credited as being the man who broke capitalism. If you don't know this story, look it up on YouTube, there are a lot great videos that can explain it better than I can. In short, corporations now believed that their ONLY stakeholder was the stockholder. Their sole purpose was to generate wealth for stockholders.

If you want to address housing affordability, you have to address the shift in power of corporations - both within our government and in our society. A good starting place would be government policy mandating the wage gap. No I'm not talking about a gender wage gap. I'm talking about the gap in pay between the lowest paid working in a corporation (or their gig workers, or their subsidiaries, or their 3rd party contractors - because they get sneaky about this stuff) and the highest paid. In 1978 that gap was 30.3% according to Statista. In 2021, it was 398.8%.


But good luck regulating that - there are a whole slew of laws and rules that have been changed since 1978 that make getting a law like that passed, impossible.

But once that happens...
Then we can talk about addressing other important issues effecting housing prices such as the huge corporations gobbling up real estate and then renting it out at inflated prices, or worse, leaving perfectly habitable properties vacant. Though, to be honest, the higher interest rates are actually helping with that problem. "According to data reported by the PEW Trust and originally gathered by CoreLogic, as of 2022, investment companies own about one fourth of all single-family homes. Last year, investor purchases accounted for 22% of American homes sold. This is significantly down from the 80% number in 2020-2021, why is this? Mostly, debt has gotten more expensive over the last year." (Source) 

Or maybe inventory is low (driving prices high) because in some parts of the country, we're running out of open space to build on, restrictive zoning laws limit the density of the houses we can build, and force us to build more roads and more parking lots because houses are nowhere near shopping. Or maybe inventory is low because the cost of construction is high and skilled workers to build the homes are in short supply because we've spent the last 40 years deriding "blue collar" work and encouraging our children to incur more debt then they would buying an over-priced home, to get an education they'll never be able to use, or pay for. Or maybe inventory is low because our modern American society values square footage and loneliness as status symbols over multi-generational living in modest homes that can be maintained with a reasonable amount of time and money? When is the last time you saw a single family home built that was under 3,000sq ft? Not in my corner of the country. But when I sold my enormous 5 bedroom home on 2 acres of land for a smaller house within walking distance of stores and restaurants, there were some who thought I was nuts, and thought less of my status too.

Or maybe housing shouldn't be investments or vehicles for building wealth and planning for retirement because that is actually contributing to income inequality, wealth gaps. Societally it has acted as a cover for the lower and middle classes to believe they are still accumulating wealth and object less to losing other benefits and vehicles to wealth over the last few decades. But if you look at comparisons to the generations, the loss is abundantly clear. That wealth didn't just disappear, but also didn't trickle down the generations.

Source

I'm exhausted just thinking about it all, to be honest. Do we, as a society, need to address housing affordability? In my humble and brutally honest opinion, yes. Will it be easy, straightforward, or quick? Not at all. I'd just like see some focus (from our politicians, media, and society generally, not you or anyone reading this specifically),  on real solutions, to real problems, instead of more band aids on arteries or slight of hand distractions.

Ms. Evans - thank you for this exegeis on a complex multilayered phenomenon. We have always considered this a cyclical business and the common wisdom had always been to "ride it out, cause things will get better again".   You have pointed to fundamental changes as the causes contributing to this situation and these new fundamentals are not going to go away all by themselves. If we cannot look to government and business leaders to address these problem, it will have to be come from informed and thoughtful informed professionals such as you. 

Warning - this gets passionate and touches on a lot of issues. This is not directed at the original poster or any one who has or will comment specifically.

Is it in the best interests? From a purely capitalistic perspective - absolutely not. As title agents, it is the same amount of work to clear title and close on 123 Main St no matter if the sale price is $200k or $900k. Title premiums are tied to sale price to reflect assumed risk on the part of the underwriter, not to reflect amount of work done by the agent. Realtor income as a percentage of the sale price - I don't know any actual history as to how this came to be, but logically speaking, it provides an incentive for a seller's agent to negotiate the best price possible for their client and "sales commissions" more broadly speaking have historically been based on a % of the sale. Lenders always benefit from higher prices and higher interest rates because, like title, the amount of manhours they invest in a transaction is not related to the sale price.

From a professional ethics perspective - should we as ethical professionals who advocate for the good of our customers, even if it hurts us. Well, ethically speaking, probably. 

From a societal perspective - As people, who have to live here, buy homes here, have children that maybe we'd like to get our of basements? Definitely.

I don't think it's really a question of should housing affordability be addressed? Of course it should be. Homelessness does not benefit the people, governments or businesses that make up a society.

I think the better question is how should housing affordability be addressed?

It's not by strong arming entire industries into lower profit margins. (Including the proposed idea of forcing lenders to allow assumptions.)

It's not by knocking a nominal couple hundred dollars off the closing costs at settlement - no matter who's pocket you take them out of. 

Those things don't solve any problems. They are band-aids for severed arteries. Just let us all die in peace at that point. I have better things to use my last breathe on.

Housing Affordability is a phrase that automatically points people in the wrong direction to solving the problem. Price is a symptom, not a cause.

If you want to fix the problem, you have to address the cause.

Are high interest rates influencing supply? Sure. But that's the easy one to point the finger at. Why are the interest rates high to begin with? OR for that matter, how do we define high? I'm a little young for this, but I've never heard anyone complain about inventory problems in the real estate market when interest rates were in the double digits in the eighties. My mom bought her first house in 1987 with an 11% interest rate. That very same house sold for more than double the price 11 years later and that price more than doubled again in the next 10 years. Do you know what did not double during each of those decades? Wages. I bought my first house in 2003. It was half the size of that house I grew up in. It was a townhouse, not a single family. It was in the middle of no-where, over an hour from where I grew up. And I paid almost twice what my mom paid in 1987 for the home I grew up in. I was earning $4k less per year than she was in 1987 even though we were working comparable white collar jobs for wage comparison purposes.

So is the answer that we address wages? Nope. Not good enough. We have to dig even deeper. It's still a symptom, not a cause of the problem.

Wages have stagnated. Why have wages stagnated? Because corporations adopted a new perspective on how to run their businesses. There used to be a belief that businesses were indebted to the society they profited from and moreover, the people who worked for them. They believed their number one stakeholder was their employee. This belief is what gave us on the job training, retirement and pension plans, employer paid healthcare and more. Then came Jack Welsh. CEO of General Electric starting in 1981. He is credited as being the man who broke capitalism. If you don't know this story, look it up on YouTube, there are a lot great videos that can explain it better than I can. In short, corporations now believed that their ONLY stakeholder was the stockholder. Their sole purpose was to generate wealth for stockholders.

If you want to address housing affordability, you have to address the shift in power of corporations - both within our government and in our society. A good starting place would be government policy mandating the wage gap. No I'm not talking about a gender wage gap. I'm talking about the gap in pay between the lowest paid working in a corporation (or their gig workers, or their subsidiaries, or their 3rd party contractors - because they get sneaky about this stuff) and the highest paid. In 1978 that gap was 30.3% according to Statista. In 2021, it was 398.8%.


But good luck regulating that - there are a whole slew of laws and rules that have been changed since 1978 that make getting a law like that passed, impossible.

But once that happens...
Then we can talk about addressing other important issues effecting housing prices such as the huge corporations gobbling up real estate and then renting it out at inflated prices, or worse, leaving perfectly habitable properties vacant. Though, to be honest, the higher interest rates are actually helping with that problem. "According to data reported by the PEW Trust and originally gathered by CoreLogic, as of 2022, investment companies own about one fourth of all single-family homes. Last year, investor purchases accounted for 22% of American homes sold. This is significantly down from the 80% number in 2020-2021, why is this? Mostly, debt has gotten more expensive over the last year." (Source) 

Or maybe inventory is low (driving prices high) because in some parts of the country, we're running out of open space to build on, restrictive zoning laws limit the density of the houses we can build, and force us to build more roads and more parking lots because houses are nowhere near shopping. Or maybe inventory is low because the cost of construction is high and skilled workers to build the homes are in short supply because we've spent the last 40 years deriding "blue collar" work and encouraging our children to incur more debt then they would buying an over-priced home, to get an education they'll never be able to use, or pay for. Or maybe inventory is low because our modern American society values square footage and loneliness as status symbols over multi-generational living in modest homes that can be maintained with a reasonable amount of time and money? When is the last time you saw a single family home built that was under 3,000sq ft? Not in my corner of the country. But when I sold my enormous 5 bedroom home on 2 acres of land for a smaller house within walking distance of stores and restaurants, there were some who thought I was nuts, and thought less of my status too.

Or maybe housing shouldn't be investments or vehicles for building wealth and planning for retirement because that is actually contributing to income inequality, wealth gaps. Societally it has acted as a cover for the lower and middle classes to believe they are still accumulating wealth and object less to losing other benefits and vehicles to wealth over the last few decades. But if you look at comparisons to the generations, the loss is abundantly clear. That wealth didn't just disappear, but also didn't trickle down the generations.

Source

I'm exhausted just thinking about it all, to be honest. Do we, as a society, need to address housing affordability? In my humble and brutally honest opinion, yes. Will it be easy, straightforward, or quick? Not at all. I'd just like see some focus (from our politicians, media, and society generally, not you or anyone reading this specifically),  on real solutions, to real problems, instead of more band aids on arteries or slight of hand distractions.

Warning - this gets passionate and touches on a lot of issues. This is not directed at the original poster or any one who has or will comment specifically.

Is it in the best interests? From a purely capitalistic perspective - absolutely not. As title agents, it is the same amount of work to clear title and close on 123 Main St no matter if the sale price is $200k or $900k. Title premiums are tied to sale price to reflect assumed risk on the part of the underwriter, not to reflect amount of work done by the agent. Realtor income as a percentage of the sale price - I don't know any actual history as to how this came to be, but logically speaking, it provides an incentive for a seller's agent to negotiate the best price possible for their client and "sales commissions" more broadly speaking have historically been based on a % of the sale. Lenders always benefit from higher prices and higher interest rates because, like title, the amount of manhours they invest in a transaction is not related to the sale price.

From a professional ethics perspective - should we as ethical professionals who advocate for the good of our customers, even if it hurts us. Well, ethically speaking, probably. 

From a societal perspective - As people, who have to live here, buy homes here, have children that maybe we'd like to get our of basements? Definitely.

I don't think it's really a question of should housing affordability be addressed? Of course it should be. Homelessness does not benefit the people, governments or businesses that make up a society.

I think the better question is how should housing affordability be addressed?

It's not by strong arming entire industries into lower profit margins. (Including the proposed idea of forcing lenders to allow assumptions.)

It's not by knocking a nominal couple hundred dollars off the closing costs at settlement - no matter who's pocket you take them out of. 

Those things don't solve any problems. They are band-aids for severed arteries. Just let us all die in peace at that point. I have better things to use my last breathe on.

Housing Affordability is a phrase that automatically points people in the wrong direction to solving the problem. Price is a symptom, not a cause.

If you want to fix the problem, you have to address the cause.

Are high interest rates influencing supply? Sure. But that's the easy one to point the finger at. Why are the interest rates high to begin with? OR for that matter, how do we define high? I'm a little young for this, but I've never heard anyone complain about inventory problems in the real estate market when interest rates were in the double digits in the eighties. My mom bought her first house in 1987 with an 11% interest rate. That very same house sold for more than double the price 11 years later and that price more than doubled again in the next 10 years. Do you know what did not double during each of those decades? Wages. I bought my first house in 2003. It was half the size of that house I grew up in. It was a townhouse, not a single family. It was in the middle of no-where, over an hour from where I grew up. And I paid almost twice what my mom paid in 1987 for the home I grew up in. I was earning $4k less per year than she was in 1987 even though we were working comparable white collar jobs for wage comparison purposes.

So is the answer that we address wages? Nope. Not good enough. We have to dig even deeper. It's still a symptom, not a cause of the problem.

Wages have stagnated. Why have wages stagnated? Because corporations adopted a new perspective on how to run their businesses. There used to be a belief that businesses were indebted to the society they profited from and moreover, the people who worked for them. They believed their number one stakeholder was their employee. This belief is what gave us on the job training, retirement and pension plans, employer paid healthcare and more. Then came Jack Welsh. CEO of General Electric starting in 1981. He is credited as being the man who broke capitalism. If you don't know this story, look it up on YouTube, there are a lot great videos that can explain it better than I can. In short, corporations now believed that their ONLY stakeholder was the stockholder. Their sole purpose was to generate wealth for stockholders.

If you want to address housing affordability, you have to address the shift in power of corporations - both within our government and in our society. A good starting place would be government policy mandating the wage gap. No I'm not talking about a gender wage gap. I'm talking about the gap in pay between the lowest paid working in a corporation (or their gig workers, or their subsidiaries, or their 3rd party contractors - because they get sneaky about this stuff) and the highest paid. In 1978 that gap was 30.3% according to Statista. In 2021, it was 398.8%.


But good luck regulating that - there are a whole slew of laws and rules that have been changed since 1978 that make getting a law like that passed, impossible.

But once that happens...
Then we can talk about addressing other important issues effecting housing prices such as the huge corporations gobbling up real estate and then renting it out at inflated prices, or worse, leaving perfectly habitable properties vacant. Though, to be honest, the higher interest rates are actually helping with that problem. "According to data reported by the PEW Trust and originally gathered by CoreLogic, as of 2022, investment companies own about one fourth of all single-family homes. Last year, investor purchases accounted for 22% of American homes sold. This is significantly down from the 80% number in 2020-2021, why is this? Mostly, debt has gotten more expensive over the last year." (Source) 

Or maybe inventory is low (driving prices high) because in some parts of the country, we're running out of open space to build on, restrictive zoning laws limit the density of the houses we can build, and force us to build more roads and more parking lots because houses are nowhere near shopping. Or maybe inventory is low because the cost of construction is high and skilled workers to build the homes are in short supply because we've spent the last 40 years deriding "blue collar" work and encouraging our children to incur more debt then they would buying an over-priced home, to get an education they'll never be able to use, or pay for. Or maybe inventory is low because our modern American society values square footage and loneliness as status symbols over multi-generational living in modest homes that can be maintained with a reasonable amount of time and money? When is the last time you saw a single family home built that was under 3,000sq ft? Not in my corner of the country. But when I sold my enormous 5 bedroom home on 2 acres of land for a smaller house within walking distance of stores and restaurants, there were some who thought I was nuts, and thought less of my status too.

Or maybe housing shouldn't be investments or vehicles for building wealth and planning for retirement because that is actually contributing to income inequality, wealth gaps. Societally it has acted as a cover for the lower and middle classes to believe they are still accumulating wealth and object less to losing other benefits and vehicles to wealth over the last few decades. But if you look at comparisons to the generations, the loss is abundantly clear. That wealth didn't just disappear, but also didn't trickle down the generations.

Source

I'm exhausted just thinking about it all, to be honest. Do we, as a society, need to address housing affordability? In my humble and brutally honest opinion, yes. Will it be easy, straightforward, or quick? Not at all. I'd just like see some focus (from our politicians, media, and society generally, not you or anyone reading this specifically),  on real solutions, to real problems, instead of more band aids on arteries or slight of hand distractions.