Brian Lehrer: It's The Brian Lehrer Show on WNYC. Good morning again, everyone. Now we'll check in on the housing market for today and perhaps for the year ahead. We did a segment recently on how it's such a terrible time to buy or sell a home. Mortgage rates are making home purchases unaffordable for so many more people than when interest rates were lower and people don't want to sell at the lower prices that they would have to command to incorporate the interest rates to make them affordable for a lot of buyers.

It's been a bad time to buy or sell a home. Mortgage rates are dipping down slightly. They are still far higher than before the pandemic and nationally, housing developments, that is construction of new homes, looks to be resuming, at least for now. While this might be the worst time to buy a home in a long time, some economists think 2024 could be what? The year of the renter.

For those looking to buy their first home, there are a couple of trade-offs to be considered compared to renting. Joining us now to break down some of the math that potential home buyers or renters should take into consideration to make the best decision and how the housing market might look as this year goes on is Ronda Kaysen, real estate reporter for the New York Times, who has an article on this. Hi, Ronda. Thanks for coming on. Welcome to WNYC.

Ronda Kaysen: Thank you so much for having me. I'm so excited to be here.

Brian Lehrer: There are a lot of places we could enter in the home buying and selling market or in the rental market. Let me enter here. "More apartments," you write, "Are under construction than at any time in half a century delivering renters more new apartments than they've seen in decades." What are the implications of that?

Ronda Kaysen: We have a million new units of rental housing under construction right now. We have not seen that many units of housing since 1973. About more than half of them are going to be available this year. They're being built all around the country primarily in New York, in the Sunbelt and up through the Rockies and in the Midwest. They're being built not just in cities, but also in the suburbs and excerpts.

Even New York has already seen increase in inventory because there is some construction happening here, but also there's a lot of people who were going to sell their condos or co-ops are struggling to sell and are deciding to rent them instead because rents are still actually really high so they can get pretty good money for their rent. That's adding inventory in New York.

Brian Lehrer: Interesting. You're right, mortgage rates have edged down from their October peak of almost 8%, and inventory has ticked up as sellers creep back into the market and yet it's still a bad time to buy, right?

Ronda Kaysen: Yes. One economist put it this way. He said basically houses have become a luxury good because home prices are still up 45% since before the pandemic. You're looking at the house prices are just at enormous highs and the borrowing costs are still really high. We're not at 8%, but 6.6% still pretty high interest. You're buying a product that's peaked.

Economists don't think home prices are going to go up much this year. They may be flat, they might go up maybe half of normal. Unless you're going to stay in your house for 10 years, it's not the best financial decision right now to buy a house.

Brian Lehrer: Did you see that stat from Manhattan recently? Manhattan is its own market and doesn't necessarily reflect everywhere, but I think there's some broader implication of this, that a crazy large share of the home purchases in Manhattan last year were in all cash. What that really says is not so much that a lot of people have a lot of money out there, so they're buying all cash but that the only people who can afford to buy practically are those with enough money to avoid the extra expense of interest rates.

Ronda Kaysen: It's 60%, it's insane. It's twice the national average of cash buyers. Cash buyers in Manhattan are absolutely dominating the market, which makes it even harder to buy because prices kept going up in New York City last year. They're up 10%. If you're trying to buy and you have a mortgage and there's not that much inventory in the market and you're competing with people with all cash, it's just still a very hard market to buy a house or an apartment in.

Brian Lehrer: Say people do the classic formula if they're hoping to buy of 20% down payment on a house at let's say $400,000, that's not a house in Manhattan, but a lot of places. To use the example in your article, that's the example that you give, a 20% down payment on a $400,000 house. Does fluctuating a point or half a point in the interest rate make a difference to buyers in that position?

Ronda Kaysen: It actually does. If you were to buy it today, it's like say 6.5% for a 30-year loan. It's a little higher than that, 6.6, but let's say you get one for 6.5, your monthly payment just for interest and principal, not county taxes would be just over $2,000, $2,023 a month. If the rates went back up to 7%, you would be paying $2,129 a month. If you had bought during the pandemic, that same payment would be $1,349.

That gives you a sense of where the sellers are at because if I own an apartment right now or house and I'm paying $1,349 a month for mortgage and interest, and I go I want to buy a different place and my payments are going up substantially and so I'm going to lose so much money just in interest payments alone, it doesn't make sense. It's just not a smart financial move for me to move.

Brian Lehrer: Listeners, help us report this story. Anyone out there considering buying a home this year, what calculations, financial or otherwise are you making in order to make it happen or to decide whether it can happen for you or if you recently purchased a home, how is it working out financially? We'll discuss with our guest. For some of you out there, even with a down payment as we were just saying, the interest rate on your mortgage plus additional fees might be more than you paid for rent in your last rental.

How are you making it work? 212-433-WNYC, call or text, 212-433-9692. For you renters, anyone apartment-hunting right now? Help us report that part of the story. What are you seeing in the market? We know a significant portion of renters in New York City, in the metro area, are rent-burdened, meaning paying shares of your income for rent that are considered really burdensome and squeeze you on duly for other things.

Anybody listening who is been able to ease that burden in our listening area or really anywhere in the country where you happen to be listening right now because the rental market is a little better than the home-buying market for the people living there. 212-433-WNYC, 212-433-9692. Who moved regions to or from the New York area or wherever you move to or from, largely because of home prices buying or renting?

212-433-WNYC, 212-433-9692 for our guest, Ronda Kaysen, who's been writing about this for the New York Times. I guess a question that a lot of people might have, Ronda, based on first part of our conversation is what do economists think are going to happen with interest rates this year, particularly mortgage rates? Will they trend down significantly?

Ronda Kaysen: Most economists, the most optimistic thought we might dip below 6% and the pessimists thought we might creep back up to 7%. We are in a holding pattern. I think the line I'm getting is that interest rates are where they're going to be. They may edge down a bit, they may go up a little bit, but we're certainly not going to go back to 3% interest rates unless something drastic happens in the economy, which you wouldn't want to happen anyway would make it an unpleasant time to buy a house for other reasons.

Because we have such a lack of inventory, home prices aren't really going to come down a lot. I think in many ways we are where we're going to be and any changes are going to be very incremental at this point.

Brian Lehrer: Explain the last part of that a little more. When you say home prices aren't going to come down very much because there's a lot of inventory.

Ronda Kaysen: The lack of inventory.

Brian Lehrer: Oh, lack of inventory. That makes sense. I guess it means that people just aren't willing to sell if they have to reduce the price. They have a goal in mind or they're thinking about 2019 or 2021 kinds of prices that their home would bring and with what people can afford now with the high-interest rates, which is less for them as the seller, they're just not willing to come down?

Ronda Kaysen: Right. It's not so much that they're not willing to come down in price. There's a couple of factors going on. One is there's a long-term trend toward people staying in their [inaudible 00:10:29] longer, and that predates the pandemic. People have been living in their homes longer. It happened with boomers and it may extend into the next generation. That's one piece of the story. The other piece is if you locked-in at 3% or 2.5% interest rate, home prices are still really high. You're now going to be a buyer like everybody else.

You may look at that environment and just say, "It's not worth it for me to move right now. Maybe we'll just have the kids share a bedroom longer or maybe we'll remodel that." It doesn't make a lot of sense to trade what you have now for something that's going to cost you substantially more to own. I think it's less about them lowering the price and more about people making due with the situation they're in and seeing that a move is not going to improve the quality of their lives tremendously.

If you go back from this though, the bigger picture is that we haven't built enough housing since the Great Recession and so we are underbuilt dramatically of all types of housing, not just rentals, but single families, multi-families, townhouses, housing for seniors, all sorts of housing. We have underbuilt anywhere from two million units on the conservative end to almost seven million units. That shortage of housing means there's not a lot of new supply to make up for the fact that people are staying put and it's keeping home prices high because there's just a massive scarcity of available homes to buy.

Brian Lehrer: Nationally speaking, why is there all that under-building? We talk a lot on this show about the need for more housing construction in the New York metro area, and that there's so much resistance. Everybody says, "Oh, we desperately need more affordable housing," and then the second thought is just don't put any near me and that NIMBY stops home construction in our area to a really devastating degree right now. Is it the same thing around the country?

Ronda Kaysen: That's one piece of it, and that's a big piece of it, but there's also if you go back to 2008, there was this glut of housing that came on the market because of the foreclosure crisis. Developers just stopped building and they stopped building for a number of years. We went from building like 2 million new units of housing a year to like 400,000. That's what the economist at Fannie Mae just told me, and now we've been picking back up and home builders stats are up.

In 2025, we're going to start to see a lot of new units coming on, but we still have this shortage from those years that the population has continued to grow so we still just have this-- We didn't build all that time. We still have a deficit from that time. On top of that, you have zoning rules that exist in communities all around the country, especially the Northeast where single-family homes are prioritized, where you have to have front lawns and you can't put in ADUs and you can't convert your garage into a home.

California's been really trying to fix that, but those pieces, those structural politics play a part in it. That's why you're seeing a lot more development in the Sunbelt where zoning rules are looser, but also labor costs are really high here. Material costs went up, interest rates have gone up for developers just like they've gone up for home buyers. Then on top of that, there is an element of NIMBYism. If you own a house, it's not necessarily in your best interest for prices to come down. If they're going to build a bunch of new housing right near you, it might affect your personal investment.

Brian Lehrer: So interesting. I came into this conversation thinking we would talk a lot about how much we've digested the changes from the pandemic so far and you're telling me we haven't yet digested the changes from the Great Recession of 2008, which was largely a mortgage crisis and attending credit crisis. Albert in Toms River, you're on WNYC. Hi, Albert.

Albert: Hey, Brian. How are you? I just wanted to give you a quick story. I am going to be putting my house on the market only because of the value that has grown in eight years. I built my home at the Jersey Shore. I only paid $365,000 and I've been evaluated for multiple realtors at $800,000. I guess it helped me quite a bit in doing that, but I had to wait for our mayor's race to enact because they had a CO issue, and now that the new mayor's in with his team, we no longer requires COs on a resale. That made me pull my trigger.

I guess my question is that I'm going to South Carolina Myrtle Beach where with the equity I have and some of my savings, I can buy two houses cash. I guess my thought, even for your guest who reports, is would I be better served if buying three houses and then have a small mortgage on two of them as investment properties and have the house-- My primary home I have is owned outright cash and then take the money I have left over and buy two houses for rental income?

Brian Lehrer: My head is spinning a little bit from those scenarios, but Ronda, one takeaway. I don't know if you can answer his precise question about multiple investments, but he's moving to South Carolina because of home prices.

Ronda Kaysen: I'm not a financial advisor so I can't give you advice on how to structure that arrangement, but I do know actually the Jersey Shore is an area where prices have really gone up a lot. One thing though that is interesting is Americans overall are moving less, but when we move, we're moving for home prices.

It's a really interesting move that you're making because that's really following a trend. People are leaving New York and they're heading to New Jersey or Florida or Connecticut where it's a little bit cheaper. People are leaving Boston and they're heading to Worcester. When we're moving, the cost of housing is the single biggest driver of our move. It's interesting, like you said, if you can get literally three houses for the price of one, that is a mind-bending thought.

Brian Lehrer: It goes back to another story we've covered on the show recently, the report that came out that showed for all the talk in the political sector about how people are leaving New York State and this region because of high taxes. What it really turns out to be is that people aren't leaving. It's not the rich who are leaving to escape taxes. It's the more middle-income people and lower-income people who are leaving and the reason primarily is housing costs and other things in the private sector. Shannon in Westchester, you're on WNYC. Hi, Shannon.

Shannon: Hi, guys. Thanks for taking the call. I appreciate it. I love every point that you guys have been talking about. One of the things that I think I wanted to pull on that a little bit on this little thread was institutional investors. Looking throughout the time of people coming to New York and they're starting a family, typically, they go in the city when they're young, in their 20s and height of their career, typically move to the suburbs when they're ready to raise children, and then after that, do the great migration down south.

One thing that I've been seeing more and more since 2008 is the advent of institutional investors getting in I think the number is something north of 20% of all single-family homes. I was wondering your thoughts on how that also limits that cycle of people and starting in the city, going to the suburbs, retiring in more affordable area like Albert's doing. Doesn't that also have a great effect on the amount of people that's there or what's available?

Brian Lehrer: Great question. Corporate investments in homes is artificially stoking the prices.

Ronda Kaysen: Actually, I could talk about this one for days. I wrote a story last September about a community in Charlotte, North Carolina where literally every home but one-on-one block sold to a real estate investor in a period of two years. Wall Street has been investing since '08 in single-family homes and converting them to rentals. They've really targeted what's like the starter home.

If you want to buy a million-dollar house in Charlotte, there'll be cash buyers, but they're not going to be Wall Street. If you're trying to buy a $200,000 home in a mixed neighborhood with good schools, you're going to be competing with an investor like Progress Residential or Invitation Homes. It's really transforming those communities into rental communities rather than for-sale communities. It is another factor that's making it really hard for first-time buyers to break in.

Brian Lehrer: One more call. Elisa in Queens, you're on WNYC. Hi, Elisa.

Elisa: Hi, how are you?

Brian Lehrer: Good. How are you?

Elisa: I'm doing fine. Thank you to pick up my call. I have a question. I just heard you talking about the housing buildups like one new house. I'm participating in the program called voucher Section 8 housing and I have it. I just want to know if it's difficult for me to get one new house, or I'm looking in the market now to see if I could get something. Give me idea what can I do for me to participate in that to get my new house. [crosstalk]

Brian Lehrer: I think you said to our screener that maybe a two-family house because you could have one unit for income.

Elisa: Yes.

Brian Lehrer: Well, again, I know you're not a financial advisor, Ronda, but can you help Elisa at all?

Ronda Kaysen: Elisa, to make sure I understand you, you have Section 8 housing. Is that right?

Elisa: Yes.

Ronda Kaysen: Did I misunderstood? I don't write about Section 8 too much. What I do know, though, is that, again, there's a shortage of Section 8 vouchers. It's great that you have one. I really actually don't know how that would work and it's not my area of expertise. Getting access to a two-family home where you could have income generating is obviously hugely beneficial for people.

Brian Lehrer: Elisa, I hope that's a little bit of a start. Listeners, text us some advice for Elisa, and we'll try to throw it in, although we're coming to the end of the segment. I want to bring up the non-financial aspect of all of this to close because you write about how the math might not make sense for Elisa or anybody else if potential buyers are looking for an investment primarily, but that changes when considering what you call a forever home. Meaning, the emotional aspect of all this needs to be taken into account too, right?

Ronda Kaysen: Yes. I think that's a really important thing to think about. If you're going to live somewhere for 3 years, you do want to think about the short-term market but if you're looking for a place to live for 10 years or longer, there's a huge benefit to stability. I don't think it all comes down to dollars and cents, and eventually, the house will have a return. If you have a kid in high school, as I do, and you have to move suddenly because your landlord doesn't want to renew your lease, that could have a huge lasting impact on your kids if they have to change schools, if your commute suddenly gets substantially longer.

Renting, unless you have an unstabilized lease has a lot of built-in instability in it, and there's a lot of generational wealth that is built through stability. I don't want to say to people, "Don't ever buy." I think that it's not always just dollars and cents. It's not like investing in a stock, you're investing in your life, and you have to live somewhere. There may not be any rentals that you like in the neighborhood that works for you or there may not be any rentals that are available that are large enough for your household. It's an emotional decision.

For many people, living in one place for a long period of time has enormous benefits that go beyond just the cost of housing. Also, whatever you pay right now is locked in because the way our mortgage system works. You're locked in, that's going to be your monthly payment forever until the loan expires, until you pay off your loan, which isn't true with renting. Your salary will change over time, and your monthly payments won't, and that is tremendously valuable and stabilizing.

Brian Lehrer: Ronda Kaysen, real estate reporter for The New York Times. Not many of our segments on any topic end with the word stabilizing these days, so thanks so much for that, and thank you very much for coming on.

Ronda Kaysen: Thank you so much for having me. It was such a delight. It was great speaking with you.

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