2023 SXSW: Why U.S. housing is so expensive, according to experts (2024)

Yahoo Finance’s Allie Garfinkle joins the Live show to discuss key takeaways from several housing panels at the 2023 SXSW Conference in Austin, Texas.

Video Transcript

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RACHELLE AKUFFO: Industry leaders and innovators from a myriad of sectors are gathered in Austin, Texas for South by Southwest, the music and tech festival at the intersection of key industries such as technology, energy, and, of course, startups. Amid discussions of the growing real estate market, one question keeps coming up for many attendees-- why is real estate so expensive? Yahoo Finance's Allie Garfinkle attended several housing panels to bring you the biggest takeaways. So Allie, what did you find?

ALLIE GARFINKLE: Hi, Rachelle. Yeah, as I was attending all these housing panels, I think I expected a bunch of different themes to emerge. But one question just kept coming up, as you said, housing costs, housing costs, housing costs. Why is housing so expensive? And there were, sort of, three reasons that, I think, everybody, sort of, came back with.

The first was not enough inventory. That's something we've talked about a lot on this show, but it was really hitting home for me at South by Southwest. It is in part, an economics 101 problem. There simply aren't enough houses on the market to meet the demand that's out there right now.

According to the National Association of Realtors, the supply for homes in the US that are for sale reached a record low in 2022. Now that number has spiked up slightly since then, but still low labor shortage, rising material costs, rising interest rates, it has contributed to incredibly low supply.

The second one that came up was actually a surprise to me. Government codes and regulations are causing a lot of problems when it comes to not only making homes riskier to build, but harder to afford. For example, the regulations imposed by all levels of government on new homes account for $94,000 or 23.8% of the average current sales price in the United States.

94K is being added by home by government codes and regulations. And, of course, anything regulatory is going to be incredibly difficult to unwind. So of all the problems, I think, Rachelle, that we heard at South by Southwest when it comes to housing prices, that was the one I think that people were, frankly, the most stumped by.

And of course, the last one that came up was something that came up on-- that has come up on the show many, many times-- economic uncertainty. Now, how does economic uncertainty affect housing? Well, there's a lot of questions that home builders have, for example.

What will happen with interest rates? Will demand hold up if interest rates keep going up, if mortgage rates keep going up? And are we plunging into a recession? That makes it harder to want to build. It also makes housing less affordable because there are fewer houses on the market.

So that said, I will say there is some good news here. This month was actually the third straight monthly increase in builder sentiment levels. So hopefully, builders in the market could be due for a lift soon.

RACHELLE AKUFFO: There's something at the other end of the spectrum, not such great news. Data from Princeton University's Eviction Lab found that evictions are back to pre-pandemic levels in many US cities. Since March of 2020, US landlords have evicted over 2 million tenants. So with many COVID-era moratoriums ending then, what's the outlook for new supply and more new homes expected to really bring some of these costs down?

ALLIE GARFINKLE: Yeah, Rachelle, there is definitely a little bit of optimism. We're definitely in a better place than 2022. That's something I heard over, and over, and over again. That said, builder confidence being up, good news, right?

However, this eviction data could be underselling the scale of this problem. I think it's important to say that, you know, even if more houses enter the market, there's actually a lot we don't know about these evictions despite this data. For instance, the data itself is already jarring.

Take Minneapolis-Saint Paul where over the last four weeks, an average of almost 300 evictions a week are being filed. To compare that to eviction moratoriums that time when those were in effect, that number was 20 evictions a week. So 20 per week, now 300 per week.

I think in the end, there's a lot we don't know about this problem. So it's hard to say how much supply will really affect what does and doesn't happen. That said, why don't we know more about this problem was, of course my first thought as I was researching this. And as it turns out, Princeton's Eviction Lab is just about the closest thing we have to a national eviction database.

So the truth is there are so many places in this country where those numbers could be even higher. And we simply might not know how to address the problem because we don't have the data. But hopefully, more housing supply will eventually help some of those people out.