{"text":[[{"start":6.2,"text":"I bought my house in Brooklyn in 2020, using a 30-year fixed-rate mortgage priced at 2.75 per cent. Since then, inflation and a strong economy have driven the average rate for a 30-year fix well above 7 per cent. So I enjoy a big lump of way-below-market financing while the value of my home has kept up with inflation or better, if online valuation tools are to be believed."}],[{"start":31.2,"text":"I feel very smug about this, but it’s bad for the country, and it’s not all good for me. Unless things change, I’m locked into the place until I die or turn 79, whichever comes first. Downsize when the kids leave? Move for a great job offer in another city? Nope. Both would leave me poorer."}],[{"start":49.3,"text":"Mortgages like mine are the reason why US home prices are very “sticky down.” When the economy is strong or money is cheap, houses get more expensive fast. When conditions reverse, rather than adjusting to the new reality, homeowners simply refuse to sell, reducing supply. The market, rather than adjusting, freezes. Existing home sales in the US are stuck at about 4mn units a year, the same meagre level as after the housing bubble burst in 2008. At the same time, average home prices have been stable in inflation-adjusted terms since mortgage rates started their climb in early 2022."}],[{"start":87.9,"text":"As a result, the Atlanta Fed’s home affordability measure, which compares median incomes to median home prices, is as ugly as it was at the height of the housing bubble in 2006. Young people think home ownership is increasingly out of reach, and they’re right. The median age of first-time home buyers has recently hit 40. Looking for an explanation for why consumer confidence surveys have remained weak — the Conference Board’s measure just hit a 12-year low — even as the economy has recovered strongly? Housing is the place to start. A part of the economy we are all acutely aware of is not working."}],[{"start":125.7,"text":"This is not just terrible for the young. It is a drag on the economy as a whole, both because of forgone activity associated with home sales and because of lost dynamism. People locked into their houses don’t switch to more productive jobs elsewhere (households’ expectations of moving are scraping along at all-time lows). "}],[{"start":144.15,"text":"High unfulfilled demand might seem like an opportunity for homebuilders, but housing starts have been falling since 2022, and homebuilder confidence is in the dumps. In recent years builders have used subsidised financing to entice buyers, but the latest leg up in rates makes this more expensive. Meanwhile builder input cost inflation leapt to about 8 per cent this spring, and stayed there. "}],[{"start":167.3,"text":"On the labour side, the problem isn’t so much cost as availability. The August homebuilder survey from John Burns Research notes that labour shortages are leading to longer building cycles, a problem many builders attribute to immigration enforcement. “There are a lot of homebuilders that were already on thin ice on profitability,” before rates and costs began to rise again, says Rick Palacios of Burns. “When profit margins get into mid-single digits, that is a natural nudge for them to slow construction.”"}],[{"start":199.3,"text":"Yet despite housing contributing almost nothing to real GDP growth this year and last, the economy continues to grow. In fact, it may be overheating, which is why the Fed just raised interest rates. But there’s a problem. Traditionally, the rate-sensitive housing sector has been a — or the — prime channel for the transmission of monetary policy. As the economist Edward Leamer put it two decades ago, “housing IS the business cycle”: it’s not the biggest sector of the economy, but it is the crucial swing factor. Not so today. Higher rates will only pressure a sector that is already on its knees."}],[{"start":236.45000000000002,"text":"The swing factor today is, instead, tech investment and the stock market wealth it has brought in its wake. On one estimate, AI investment contributed a full percentage point to real GDP growth in the second quarter, a figure that seems unlikely to fall this quarter. And this investment is not — for now — rate sensitive. The richest companies in the world have decided that AI competitiveness is an existential requirement. Additional interest expense pales compared to what they have already absorbed in higher silicon prices. What is the Fed to do? Admit the reduced potency of their primary policy tool, hold rates steady and risk inflation running higher? Or hit housing and other cyclical sectors even harder, creating an even more lopsided economy? Both horns of this dilemma are dangerously sharp."}],[{"start":285.75,"text":"The prevalence of the 30-year fixed-rate mortgage is, in large part, a policy choice. It is propped up by secondary-market support and guarantees from government-sponsored entities Fannie Mae and Freddie Mac. So our housing dilemma is a reminder, if we needed one, that government intervention in financial markets always comes with trade-offs. But whatever its virtues and vices, the 30-year fix is going nowhere; America would sooner abolish fireworks on the Fourth of July. "}],[{"start":314.95,"text":"The only long-term solution is making it cheaper, easier and faster to build homes. This year’s passage of the bipartisan Road to Housing Act added some incentives and cut red tape, but there is much more to do. As election season heats up, voters should be asking candidates what they plan to do to help aspiring homeowners. People like me are lucky enough already. "}],[{"start":343.59999999999997,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1790949897_2255.mp3"}