The True State of Housing

Despite historically low interest rates and historically high housing prices, the true state of housing can be summed up in a one word: stagnant. It’s status quo. It’s a boring subject. Yet housing remains one of the largest economic drivers in our country accounting for over $1.2T in sales. It’s massive and massively important. 

 Americans’ attitudes about housing can be summed in another word: helplessness. Like many things in life today we don’t feel much control over housing. Outside of the home shopping experience, we are put on rails in terms of what we can do – how much we can afford, the fees we have to pay, we are even told when we have to do what and what not to do. It’s a daunting experience. And despite that, almost 90% of millennial renters are still emotionally committed to owning a home. 

 The reason for both the “stagnant” and “helplessness” nature of housing today can be explained with another word: outdated. For the vast majority, we buy homes today the same way our grandparents did. The dollar amounts changed but the process and players are largely the same albeit with a dash of automation here and there. At the same time, we have learned a completely different way of life and expect things to be as easy as a swipe. We rent music now vs. buying, we Uber instead of driving and we Google vs. using microfiche (yes, it’s a thing – look it up on Google).

 But the home industry still operates in the era of the acoustic modem and 8-track tape. You find a realtor (maybe on Yelp now), look at a bunch of homes, talk to a lender, negotiate prices, pay a bunch of fees you don’t understand to protect other people’s money. You get a mortgage and hope that your home appreciates before you move again (because inevitably you will move again).

 Given all of this, there is little wonder that homeownership is back to 1965 levels. We have evolved as consumers and we expect that a basic necessity such as housing to evolve as well. It hasn’t. Rentals have. They’ve created a more mix-use, amenity-laden options that not only feed our wants – hip locations, a gym, a swimming pool – but also your needs – along with the ability to move if we don’t like it and lack of any long-term commitment.

 So how do we change the “stagnant” “helpless” and “outdated” state of housing?  A last word: control. The home industry needs to learn from the successful parts of rentals, the myriad of pay-by-the-month purchase plans and the gig economy. They need to inject fairness and flexibility into the home buying process that puts homebuyers in the driver seat. Today’s homeowners want the flexibility of a rental plus a large yard for the dog. We want to believe that the process is fair; that our hard-earned down payment won’t be lost due to things outside our control. And we want all of this with simplicity and transparency.

 We are at a crossroads in housing. A ‘new normal’ is setting in. People worry that something ‘external’ will happen, they just aren’t sure what. They still want the American Dream of homeownership but they sit nervously on the sidelines. The housing industry players are also frustrated. Even with volume improving, housing starts are tepid, affordability is still a concern and profits are minimal. To break out of this rut on both sides, the entire housing industry needs to take a step back and look at everything that has changed around them, embrace it, and put the homebuyers first by putting them back in control of their own homes. This means continuing to push first-time homebuyer programs, simplifying the process, being transparent, protecting their down payment like the lenders protect their loans, and allow them the flexibility to move for that next job, to start a family or whatever. We need housing 2.0. We need a reboot. We need to start anew from the homebuyer forward. We need to truthfully peel back the current housing and economic numbers and create a new system that will scale and grow for everyone. Only then can the consumer demands be met and we can begin to unwind this twisted knot we have gotten ourselves into. And in a word we need it: now.

 Joe Melendez is the founder and CEO of ValueInsured, the only provider of down payment protection for modern homebuyers.

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