Monday, July 15, 2024

Stuck at the Start – The New York Times

Stuck at the Start – The New York Times

Buying your first home has long been a milestone of adulthood. So has selling your first home and moving into something bigger. But in the last few years, many Americans have gotten stuck in their starter house.

That’s because the U.S. housing economy is being hammered by three forces: the highest interest rates in around two decades, record home prices and near rock-bottom inventory. “Home affordability is the worst I’ve ever seen it,” Daryl Fairweather, Redfin’s chief economist, told me.

Many of those who bought their homes in recent years are unable to trade up, hampering the ability of the group behind them to purchase its own starter homes. In today’s newsletter, we’ll look at how the housing market trapped both groups.

In the past, the starter home served as a bridge: Families just starting out would squeeze into a smaller home and build equity. With time, as their careers grew and their incomes increased, they cashed in the equity and moved to something bigger.

But now that process has hit a wall. “The trade-up buyer has just disappeared,” Sam Khater, chief economist of Freddie Mac, said.

A majority of homeowners — six out of 10 — have mortgages with interest rates that are locked at 4 percent or lower. With rates now hovering around 7 percent, most people who buy a home today will pay much more interest on their new mortgage.

Economists put it to me like this: If you were to sell your house today and buy an identical one across the street, your payment would double — and that’s before you factor in how much the house across the street has gone up in value. (Which is a lot: According to Redfin, home prices are at a record high.)

In Chicago, Chris and Alison Wentland told me about the predicament in which they found themselves. Last year, they decided to sell their townhouse in the Lincoln Park neighborhood. Their children, at 2 and 6, were sharing a room not much bigger than a walk-in closet, with their daughter’s bed pressing up against their toddler’s crib. They began looking for a four-bedroom.

They had purchased their townhouse in the low $500,000s, and would likely be able to sell it for $700,000. But getting that one extra bedroom in the popular Lincoln Park neighborhood would put their next home in the $1 million range. Despite having a sizable equity from their starter home, the higher rates and higher cost meant that their monthly payments would go from around $3,000 to at least $7,500, their real estate agent warned.

Now, the professional photographs that their broker had taken of the townhouse — including a snazzy 3-D video — are languishing on a hard drive, out of the public’s view. Their home is one of 50 properties that the brokerage has photographed but has not been able to list.

It has also become harder to buy your first home. Starter homes — defined as those that cost 75 percent or less of the median home price in a given market — have gone up faster in value than any other category of home.

The problem is being exacerbated not just by rising prices and high interest rates, which affect every tier of the housing market, but also by something more fundamental: The number of new entry-level homes being built has fallen off a cliff.

In the 1970s, more than 400,000 entry-level homes were built every year. By 2020, only 65,000 were built. One reason for the drop is the rising cost of materials; smaller homes just don’t pencil out for builders.

So the supply of starter homes is not being replenished — by builders or by the last generation moving out and selling. The first rung of the ladder of homeownership, long a key part of the American dream, has become especially hard to climb.

As just one example: I spoke to a pair of sisters in Oakland who decided to pool their resources to buy a duplex, each sibling taking one unit. Before the pandemic, they were approved for $850,000. But even in that price range, they couldn’t find anything in a city with famously high property values; one house had a rat infestation, another had fungus, the sisters told me.

Their banker recently told them that they were now qualified for only a $750,000 loan — $100,000 had evaporated because of rising interest rates. If they couldn’t find anything at the higher amount, they wonder, how will they find anything at this lower price point?

Does Donald Trump’s guilty verdict matter for the 2024 election?

No. Trump’s supporters were unfazed by his impeachments and his role in the Jan. 6, 2021, attacks, and they’re unlikely to be fazed now. “It’s all the more reason for him — and for them — to press on,” Times Opinion’s Frank Bruni writes.

Yes. A criminal conviction has the potential to sway crucial undecided voters. “Trump’s felony conviction might end up more like a whimper than a bang … but, sometimes, even a whimper can be decisive,” MSNBC’s Michael Cohen writes.

Israel’s defense minister, Yoav Gallant, is a pragmatic alternative to Netanyahu’s populist leadership, Dahlia Scheindlin argues.

Life coaching: They wanted to improve their circumstances and well-being. Instead, they lost their savings.

Look closer: New York is constantly changing, but you can still spot old public artworks between towers and in traffic triangles.

Vows: Finding love and acceptance, thanks to church and therapy.

Lives Lived: U Tin Oo was a former Burmese armed forces chief and minister of defense who turned against his country’s repressive government to become a leader of the pro-democracy movement. He died at 97.

This week’s subject for The Interview is the director Richard Linklater. His latest film, “Hit Man,” is a stylish, sexy thriller that also sneaks in some provocative ideas about the shifting nature of personal identity.

I’m curious how you think about your identity at 63 years old. Do you feel like it’s fixed?

It’s the kind of thing I’ve thought a lot about my entire life: What could transform me? I was probably more in the camp of we’re fixed, give or take whatever little percentage around the edges. So I was interested in this notion lately that, oh, you can change, the personality isn’t fixed. That seems current: this notion of self and identity, gender. I sort of like that it’s all on the table, that everybody’s thinking you kind of are who you say you are.

One idea of the film, [“Hit Man”], is that we all have the power to create our own identity. The film then suggests that this includes the identity of someone capable of murder and living happily after having committed murder. That’s pretty dark!

Yes, but I don’t mind. I mean, everybody wants someone dead, probably. I’ve been in the film business over 30 years. Of course I could murder somebody.

Whom do you want dead?

No, I don’t want anyone dead. I’ll spread that out: I don’t want anything dead. But I think there’s a surprising number of people in the world who, to whatever degree voluntary or involuntary, have done something that has ended a life and can compartmentalize it away. A lot of killers among us.

Read more of the interview here.

Click the cover image above to read this week’s magazine.

This week, Cooking unveiled the Summer 100 — recipes that the team thinks you should have on repeat for the next three months. In the Five Weeknight Dishes newsletter, Emily Weinstein includes one of the meals featured on the list: summer shrimp scampi with tomatoes and corn. Emily also suggests making pepper-crusted flank steak and spanakorizo with jammy eggs.

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