June 4, 2024
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Opinion: Today’s housing market devastates working families

IN THIS ARTICLE

By Pedro A. Chavez

It seems the perfect storm has hit the housing market and its impact is devasting working families seeking access to the American dream of homeownership.

How did we get here you ask?

During the COVID-19 pandemic, we saw the Federal Reserve react by lowering interest rates to historic lows to prevent a housing market collapse as unemployment rates peaked at 14.8%, the highest since data collection started in 1948. The effect of those actions triggered a highly competitive environment for homebuyers as their purchasing power increased. Sellers were motivated to put their homes on the market to maximize profit from their home sale. Many upgraded to larger homes to meet their needs which freed more available housing inventory.

Competitiveness contributed to homebuyers’ willingness to pay way more above asking price; took greater risks including the removal of appraiser and loan contingencies to ensure their offer was accepted. Necessity combined with greed lead to overinflated housing prices.

That upward trend of higher property values was the start of our housing affordability challenges which today have become a crisis.

In March of 2022, the Federal Reserve began an aggressive strategy to tame inflation which attempted to control skyrocketing home prices. Interest rates have risen 11 times since then and those results have been brutal not only to those seeking a path to homeownership but to those real estate professionals and industries that play a role in the process. Housing market activity has slowed down tremendously, however, homes that are on the market are still selling above asking price to meet consumer demand.

Ventura County has become one of the highest-cost areas to live in as our pristine coastline and quality of life have been discovered by those seeking refuge from outside our county line. For our residents and their families, migration and even gentrification is taking place.

Working families are struggling to find housing and a lack of housing inventory continues to play a major factor as existing homeowners don’t have the appetite to sell. For the most part, those that purchased during the pandemic have stable housing payments and are staying put.

Many homeowners refinanced when rates were low and don’t hunger for change right now. Some working families are heading into the Santa Clara Valley and beyond due to a lack of housing affordability in coastal communities.

The struggle is real!

Today the average home price in Ventura County is roughly $950,000. First-time homebuyers with minimal down payments starting at 3% are being squeezed out of the housing market. With interest rates above 7%, mortgage payments have become inaccessible and unaffordable to working families which are critical to our labor force and economy. Only those with large down payments are securing a path to homeownership, meaning the gaps of inequality will continue to widen, and the vast majority are not first-time homebuyers.

In February of 2008, I wrote an Op-Ed in the Pacific Coast Business Times highlighting the lack of accountability from leaders who were responsible for creating a system that provided consumers with financial products that were based on lies and misinformation, were unsustainable and predatory in nature and led to the housing market crash of 2007.

It’s been nearly 16 years since the mortgage debacle devasted the lives and multigenerational wealth of working families and now we find ourselves facing an existential threat to our future once again.

I ask myself, “What kind of future will families have when they don’t have access to housing that they can afford?” Imagine a future where your children won’t be able to afford to rent or buy a home where they grew up.

What impact does that future have on our economy? When working people lack access to affordable housing payments — whether a rent or mortgage payment — that keeps many families in poverty and destroys opportunities for upward mobility.

It seems I have more questions than answers these days and that’s a systemic problem that we all need to solve.

Pedro A. Chavez is a mortgage consultant for Caliber Home Loans which has an office in Oxnard.