>> IF THEY CAN'T BUY,
MILLENNIALS STAY WITH RENTING,
PUSHING THOSE PRICES UP.
OUR NEXT GUEST, UW-MADISON
PROFESSOR KURT PAULSEN CALLS THE
NEED FOR HOUSING A FIVE-ALARM
FIRE AND THE FACTORS LEADING TO
IT A PERFECT STORM.
>> THE REASON IT'S A PERFECT
STORM FOR HOUSING RIGHT NOW IS,
PRIOR TO COVID, YOU HAD A REAL
DIFFICULT SITUATION IN THE
HOUSING MARKET.
WE WEREN'T BUILDING ENOUGH
HOMES, AND WE WEREN'T BUILDING
ENOUGH RENTALS, SO PRICES ARE
ALREADY UP, PEOPLE ARE ALREADY
STRESSED IN BEING ABLE TO BUY,
AND THEN YOU JUST LAYER COVID ON
TOP OF IT, THAT'S WHY IT'S A
PERFECT STORM.
THE OTHER REASON IT'S A PERFECT
STORM IS COVID MESSED WITH THE
SUPPLY CHAIN.
SO IN THE LONG RUN, ONE OF THE
WAYS TO SOLVE THE HOUSING CRISIS
IS TO BUILD MORE HOMES, RIGHT,
BECAUSE THERE'S HIGH DEMAND FOR
HOUSING SO YOU NEED TO BUILD
MORE.
BUT NOW BUILDERS ARE BUILDING
FEWER UNITS IN '21 THAN WE DID
IN 2020.
BECAUSE YOU CAN'T GET GARAGE
DOORS, YOU CAN'T GET APPLIANCES,
YOU CAN'T GET CARPETING, AND THE
PRICE OF LUMBER IS FIVE OR SIX
TIMES WHAT IT USED TO BE PRIOR
TO COVID.
SO ANYTHING THAT'S NEW, BEING
CONSTRUCTED, IS REALLY
EXPENSIVE.
AND THAT DOESN'T SOLVE THE
AFFORDABILITY PROBLEM AT ALL.
>> BY HOW MUCH DOES DEMAND
OUTSTRIP THE SUPPLY?
>> SO IN WISCONSIN, FOR EXAMPLE,
WE BUILT, LAST YEAR, ABOUT
10,000 SINGLE-FAMILY HOMES.
AND I ESTIMATE IN A NORMAL
MARKET, WE SHOULD BUILD ABOUT
30,000 HOMES.
SO WE'RE ABOUT ONE-THIRD OF
WHERE WE NEED TO BE.
WE UNDERPRODUCE THOUSANDS OF
HOUSING UNITS EVERY YEAR
RELATIVE TO POPULATION GROWTH
AND JOB GROWTH, AND THAT DOESN'T
EVEN ACCOUNT FOR IN SOME OF OUR
FAST GROWING JOB CENTER, WHICH
WOULD BE DANE COUNTY, WAUKESHA
COUNTY, BROWN AND OUTAGAMIE,
GREEN BAY, APPLETON, THERE'S FAR
MORE JOBS THAN THERE ARE LOUSING
UNHOUSINGUNITS, SO PEOPLE WHO WO
WORK THERE CAN'T EVEN FIND A
DECENT PLACE TO LIVE.
>> THE OTHER THING THAT YOU
DESCRIBED THIS AS WAS AS A
FIVE-ALARM FIRE.
WHY?
>> WELL, IT SHOULD BE RINGING
ALARM BELLS IN EVERY STATE AND
LOCAL POLICY MAKERS, YOU KNOW,
SYSTEM TO UNDERSTAND, WE NEED TO
DO SOMETHING NOW, BECAUSE IF WE
DON'T DO SOMETHING NOW, IT'S
ONLY GOING TO GET WORSE.
BUT IT SHOULD BE A FIVE-ALARM
FIRE, BUT IT NEVER QUITE RISES
TO THAT LEVEL BECAUSE THE
LEGISLATURE AND LOCAL
GOVERNMENTS OFTENTIMES DON'T
THINK THEY HAVE THE CAPACITY OR
THE POLICY TO REALLY ADDRESS
SOME OF THE MACRO ISSUES IN
TERMS OF THE SUPPLY CHAIN, BUT
THEY CAN ADDRESS THE LOCAL
ZONING AND THE LOCAL FINANCING
TO MAKE SURE THAT NEW HOUSING
UNITS ARE BUILT.
>> BECAUSE WHAT ARE THE
IMPLICATIONS OF IT GOING
FORWARD, IF IT CONTINUES IN THIS
WAY?
>> SO IF WE CONTINUE ON THE PATH
WE'RE ON, HOUSE PRICES KEEP
GOING UP, AND THAT MEANS A
COUPLE OF THINGS.
FOR FIRST-TIME HOME BUYERS, FOR
MODERATE INCOME HOUSEHOLDS,
PARTICULARLY FOR BLACK AND
HISPANIC HOUSEHOLDS, THAT MEANS
THAT ENTRY LEVEL RUNG ON THE
HOUSING LADDER IS PULLED UP,
WHICH MEANS YOU CAN'T BUY A
HOME.
AND EVEN IF YOU HAVE GOOD
CREDIT, YOU CAN'T FIND SOMETHING
THAT'S IN YOUR PRICE RANGE.
SO A LOT OF THESE HOUSEHOLDS
WILL STAY RENTERS FOR A LONG
PERIOD OF TIME, AND THAT PUTS
PRESSURE ON THE RENTAL MARKET,
CAUSING THE RENTS TO GO UP ON
THE LOW END.
SO WHEN SUPPLY IS SQUEEZED, IT
AFFECTS EVERYONE, BUT IT
DISPROPORTIONATELY AFFECTS
PEOPLE ON THE LOWER END OF THE
WAGE SCALE.
THE OTHER IMPLICATION IS,
MILLENNIALS, THE LARGEST
GENERATION IN HISTORY, ARE AT
THEIR PEAK HOME BUYING AGE.
THEY'RE ABOUT 30 OR 31 YEARS
OLD.
IF THEY CAN'T FIND A DECENT
PLACE TO LIVE, THEY'RE GOING TO
MOVE TO ANOTHER STATE.
SO IF YOU WANT TO KEEP YOUR
WORKFORCE, YOU HAVE TO HOUSE
YOUR WORKFORCE.
>> SO IN THE MARKET AS IT
CURRENTLY EXISTS, SHOULD
MILLENNIALS WHO MIGHT BE SEEKING
THE AMERICAN DREAM OF HOME
OWNERSHIP JUST FORGET ABOUT IT?
>> MY ADVICE TO MILLENNIALS
WOULD BE, FIRST OF ALL, YOU
SHOULD HOOT AND HOLLER AND GET
ANGRY BECAUSE THAT OPPORTUNITY
THAT WAS AVAILABLE TO YOUR
PARENTS IS NOT AVAILABLE, AND
PRESSURE POLICY MAKERS TO DO
SOMETHING.
BUT ON A PRACTICAL MATTER, YOU
JUST HAVE TO START GETTING YOUR
FINANCES IN ORDER, MAKE SURE
THAT YOU HAVE SAVINGS FOR A DOWN
PAYMENT, PAY OFF ANY STUDENT
LOAN DEBT THAT YOU CAN, BUT I'LL
BE HONEST, A LOT OF MILLENNIALS
ARE PRETTY FRUSTRATED.
BECAUSE THEY SEE THAT THAT DREAM
IS INCREASINGLY OUT OF REACH.
AND EVEN IF THEY PLAY BY THE
RULES AND SAVE AND GO TO COLLEGE
AND GET A GOOD JOB, THEY JUST
CAN'T AFFORD A DECENT ENTRY
LEVEL HOME.
>> BECAUSE WHAT IS THE AVERAGE
COST OF A HOME NOW IN WISCONSIN?
>> WELL, IT REALLY VARIES.
SO IN SOME PARTS OF THE STATE,
THE MEDIAN PRICE IS ABOUT 180 OR
$200,000.
BUT IN PLACES LIKE DANE OR
WAUKESHA COUNTY, THE MEDIAN
PRICE IS WELL OVER $300,000.
AND PART OF WHAT IS DRIVING THIS
IS, WHEN THE COST TO BUILD
SOMETHING NEW GOES UP, THE COST
OF ALL THE EXISTING HOAMENTS
ALSO GOES UP.
BECAUSE THE CLOSEST SUBSTITUTE
TO A NEW HOME IS AN EXISTING
HOME AND THE CLOSEST SUBSTITUTE
TO AN EXISTING HOME IS A NEW
HOME.
SO IF YOU OWN YOUR HOME NOW,
YOU'RE VERY HAPPY.
BECAUSE PRICES HAVE SKYROCKETED.
SO ON PAPER, AT LEAST, YOU'RE
MUCH MORE WEALTHY.
BUT IF YOU'RE LOOKING TO BUY,
YOU CAN'T FIND ANYTHING IN YOUR
PRICE RANGE, AND THEN AS YOU
ALSO KNOW THE STORIES, THERE'S
20 OR 30 BIDDERS, ALL CASH,
ASKING OVER THE ASKING PRICE,
AND SO AGAIN, FOR ANYONE WHO'S A
FIRST-TIME HOME BUYER,
PARTICULARLY IF YOU'RE USING
LIKE A V.A. LOAN OR A USDA LOAN
OR AN FHA LOAN, ONE OF THOSE
AFFORDABLE STARTER HOME
PRODUCTS, YOU'RE GOING TO LOSE
OUT TO SOMEONE WHO'S OFFERING
ALL CASH.
>> DOES THE MARKET KIND OF COOL
AT ALL WITH THE INTEREST RATES
GOING UP?
>> YES.
SO -- ABSOLUTELY.
SO INTEREST RATES FOR MORTGAGES
HAVE GONE UP OVER 1 PERCENTAGE
POINT OR 100 BASIS POINTS SINCE
CHRISTMAS.
SO THAT MEANS, AGAIN, FOR THAT
FIRST-TIME HOME BUYER, THAT KIND
OF MODERATE INCOME MILLENNIAL,
THE HOUSE YOU COULD BUY NOW IS
LESS, BECAUSE OF THE INTEREST
RATE.
SO THE SAME INCOME TRANSLATES
INTO LESS MORTGAGE.
SO IT'S A DOUBLE WHAMMY, RIGHT?
IT'S ACTUALLY A TRIPLE WHAMMY
BECAUSE YOUR RENT IS GOING UP SO
YOU CAN'T SAVE FOR A DOWN
PAYMENT, THE MONEY YOU DO HAVE
DOESN'T GO AS FAR, AND THERE'S
JUST A SHORTAGE OF SUPPLY SO THE
PRICES ARE OUT OF REACH.
SO IT WON'T CRASH, BUT IT MEANS
THAT THOUSANDS OF PEOPLE IN THIS
STATE WHO OTHERWISE WOULD OWN A
HOME ARE JUST NEVER GOING TO OWN