Mortgage rates are hovering around 7%, this is a 3 - 4% increase from last year. Is the American Dream of owning a home DEAD? Many people are moving back home with their parents, if this is not an option others are being forced to make alternative plans. Unfortunately for many these options include homelessness. This article follows the path of a couple that had the hopes that they would be in a home that they built by now. However, due to ongoing supply chain issues, their house has not been built and they are still living in a trailer.
As mentioned in the article, they are willing to accept the additional $800 - $1000 that they project they will need for the mortgage per month, but this will disrupt everything else that they want to do. This includes vacations, events, outings, dates, and basically anything that requires them to spend extra money. Redfin representative mentions that we are now experiencing a type of housing market hangover, i.e. some of us may have spent too much and now we have to deal with the overall side-effects. Inflation is ending this party!
Housing supply shortages, large increases in mortgage rates, and inflation are recking our lives and the housing market is part of this issue. But does this affect the primary goal of a business? As mentioned in our textbook chapter one and "The Nature of Business". The overall goal of business is just one thing, profit. Although I am mostly listing human struggles much of the backbone of this situation is business related to supply and demand and profit and loss.
One possible solution to these problems is investing in solutions that reduce demand for housing while simultaneously increasing the availability of affordable options. This could involve implementing new housing policies at the local or national level, providing incentives for businesses to invest in solutions like modular homes or micro-apartments, or even encouraging greater involvement from private investors who are willing to take on some risk in exchange for a potential return. Additionally, reducing inflation can help to lower mortgage rates and ease borrowing costs for buyers and homeowners, helping them to better manage their expenses and make more sustainable long-term investment decisions.
While solving the current housing crisis will be no easy task, addressing it through solutions that prioritize both business interests and the needs of people is crucial for ensuring a sustainable future for all. Ultimately, it is imperative that we continue working together not only as individuals but also as a society to resolve these pressing challenges facing our nation's economy today.
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NPR article referenced is by Chris Arnold.
"With mortgage rates near 7%, the housing party is over. Now it's hangover time."