Posted by John Jennings on Thursday, June 29, 2023 at 10:00 AM By John Jennings / June 29, 2023 Comment
The American dream of home ownership has been a core value for years. However, rising mortgage rates have been putting a dent in this dream, especially for new home buyers. There has been a long-standing debate in the United States about how more home building could help lower mortgage rates and improve the economy. The argument has always been that when more housing is available, the demand for homes decreases. With less demand for homes, prices will inevitably drop, making it easier for people to afford homes.
In this blog post, we will delve deeper into the impact of home building on the economy and how it can lower mortgage rates.
More Supply Helps Lower Prices
The market forces of supply and demand play a significant role in home prices. When there is a shortage of homes, prices rise. With more home building, supply increases, and prices drop. Lower prices will not only make it easier for people to buy homes, but it also means that borrowers can afford to borrow less money, which translates into lower mortgage rates.
Home building can boost U.S. employment. Construction is a labor-intensive industry and requires a large workforce. With more buildings, there will be an increase in employment opportunities across the country. The increase in job opportunities leads to a more robust economy, ensuring that mortgage rates remain competitive.
Better Economic Growth
The home building does not only create new housing units but also generates demand for goods and services. Construction materials, furniture, fixtures, and other equipment add to the economy. The increase in economic activity fosters better economic growth, which leads to lower mortgage rates.
A lack of affordable housing is a significant barrier to homeownership. More home building can ease this problem by increasing supply and driving up competition. This will lead to more accessible and affordable housing options for people with low to moderate incomes. Increased accessibility would result in a more inclusive society, one that supports economic development by offering more opportunities to individuals.
Occurrence of Market Contractions
As the population grows and people move to areas where they can find better opportunities, there is an increased need for more housing supply. Homeowners are now accustomed to the cyclical nature of the housing market, which means that market contractions can and will happen. By investing in more home building, the industry can lessen the impact of these market contractions, resulting in lower mortgage rates.
The shortage of accessible and affordable housing is a nationwide problem. It is time to recognize the vital role home building can play in addressing this problem. More home building will lead to more affordable housing, increased employment opportunities, and better economic growth. These benefits will, in turn, make it easier for people to buy homes and ensure that mortgage rates remain competitive. We need to take steps to improve the supply of accessible and affordable housing and realize the American dream of homeownership.
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