How to lower home prices in Douglas County Colorado? Build more!

The biggest driver of home unaffordability is low supply. It's almost that simple. Some areas of the world and the US have been under-building for decades. Not unlike diamonds, oil, or other commodities, strangle the supply and you can be almost 100% certain pricing will rise. OPEC never cuts production to lower prices! High and excessively fast rising property prices can also have damaging economic effects, by crowding out productive investment and leading to a misallocation of capital, like builders and developers focusing on more expensive products that usually reap higher profits for the same or similar amount of work and time. 

If the world is serious - really serious - about bringing down home prices, or preventing them from surging in value as unrealistically as was the case in the 2020-2022 window, instead of cutting back production, building should be ramped up. DRAMATICALLY. And incentives to build the kind of product the market truly needs should be the focus. Not for investors or massive private equity entities that are simply intent on making all people serfs/renters for life.

The current FED policies will most likely have the exact opposite effect of what is truly needed. They will be effective in bringing down prices in some areas, but this is ALSO what they will do:

1.  They will cut back transaction activity. When fewer homes trade, local and state tax receipts drop too. Someone will have to pay the difference in lost revenues as costs rise and most politicians seem incapable of cutting expenses or creating efficiencies.

2.  Already many builders and developers are cutting construction as labor and materials costs are up and financing costs are WAY up. With complex local zoning and regulatory issues, the time to build has increased further adding to the finance costs. New incentives should be created to focus on more affordable buildings.

3.  Those compelled to rent will spend more on renting too as that pool grows and rental prices are way up. More money spent on owning and/or renting = less money spent on home improvements, furnishings, decoration, travel, eating out, shopping in general, etc. Housing is essential, a Starbucks coffee is not. This can further hurt GDP.

4.  As home prices decline in areas, banks will become tougher in the appraisal and underwriting arena, further slowing construction as builders will fear being over-supplied.

5.  The best way to bring down home production will be via automation and technology. Those construction workers who are currently price-gouging may be in for a rude awakening when a robot replaces them. It's happening already. This could hurt employment.

In 2019 builders urged the government to ease worker visas to fuel the need for skilled labor, cut tariffs that were adding to materials costs and enact more robust low income housing tax credits. The government back then and the current government have not listened. Fed Chief Powell was appointed in 2018 and was re-appointed in 2021, a rare bi-partisan choice. The actions of the FED are akin to a war on housing affordability in my opinion and won't help that much in bringing down costs LONG TERM.  They may be effective in bringing down prices over the next 12-18 months.....but then when markets recover - and they always do - I think our housing shortages will be EVEN worse and at that point pricing escalation might shock us once again.

 - Credit Leonard Steinberg with Compass -