Erdmann Housing Tracker · Housing & Cities
TIER 4 Wed, 8 Oct 2025 00:15:19 +0000
Two more charts that might be enlightening. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ | | ---|---|--- | | | Forwarded this email? Subscribe here for more --- --- # Follow Up to "With prawns like these..." | | Kevin Erdmann --- | Oct 8 --- | --- --- | | | --- | | --- | | --- | | --- | | READ IN APP --- Two more charts that might be enlightening. Upgrade to paid All three measures in Figure 1 are indexed to 1990. Housing cost referenced here is the BEA's estimate of the rental value of all homes. Think of homeowners as both landlord and renter. When the rental value of homes increases, existing homeowners benefit because their higher rent payments hurt them as tenants, but equally benefit them as landlords. And, eventually, they will sell their homes to new buyers who will be harmed because they will have to pay the inflated price for the higher rental value the home has. while the old owner will benefit from the higher price. There's a sort of circular logic that happens when people don't think about housing costs thoroughly this way. If they only think of homeownership as an entirely separate economic action that has nothing to do with rent, then there is no way for their mental model of housing costs to incorporate that aspect of housing costs. People that think of it that way invariably conclude that interest rates, inflation, competition among home buyers, etc. are the sole factors causing housing costs to change because rent is simply not a variable they choose to consider. That's a problem because rental value is responsible for 100% of the affordability problem, for both renters and buyers. The black line is the percentage of total disposable income going to housing (rental value - whether it is paid to a landlord or to oneself). The orange line is excess rent inflation. The red line is the square feet of the average new single-family home divided by real per capita disposable income. | | ---|---|--- Total spending is stable. It is a combination of excess rent inflation and compromising into smaller homes. The average family at any given income level, after adjusting for inflation, is living in a smaller home than the average family with that income did at any time in the recent past, but they are paying as much for it. Some points of interest: * Remember that crazy housing bubble with unqualified buyers were being showered with money they couldn't possibly pay back to buy ridiculous McMansions in the desert where nobody actually wanted to live? You know, there are dozens of movies, documentaries, and books about it. Jokes on sitcoms about it. There wasn't an increase in the size of the average new home, relative to real incomes, at the time. Rent inflation briefly paused. There were things that happened at the time. There was a lending boom. There was a bit of a price bubble in some regions. There was a moderate rise in construction activity. But, the gestalt we mutually constructed from all those pieces of a population drowning in an excess of homes was a hallucination. At best, the housing shortage was briefly paused. And, all the commotion that made the period seem unsustainable was related to moving families out of cities that are incapable of briefly pausing a housing shortage. * 70% of the excess rent inflation and the associated decline in square feet per real dollar of income has accumulated after 2014. For most of that time, mortgage affordability was extremely good - better than it had ever been in the past and probably better than it will ever be again. This is a story about rents. Even if you are interested in more affordable or more attainable homeownership, it is a story about rent. 100% about rent. Arithmetically, you might be able to make homes more affordable or accessible for homeowners with lower interest rates, limits on who can purchase homes, or any of a number of other policy tweaks aimed at families buying new homes. But, those aren't addressing the disease. They are, at best, addressing symptoms of high rents. Rents can come down if either investors and families buy and build more homes. Rents can come down if investors build more apartments. And, most powerfully, rents can come down if more families are allowed to receive mortgage funding again, because families with mortgage funding are always willing to pay more than investors for homes with equivalent rents. When the cost of new homes is roughly the cost for the materials and labor a new house requires, that means that homeowners with generous mortgage access are the most powerful force potentially pushing rents down. 20th Century Americans benefited greatly from that. | | ---|---|--- It may seem ironic or counterintuitive. If your solution for helping American homebuyers isn't fundamentally about lowering rents, you're doing it wrong. You're not helping, and you're probably making it worse. Upgrade to paid You're currently a free subscriber to Erdmann Housing Tracker. For the full experience, upgrade your subscription. Upgrade to paid --- | | | Like --- | | Comment --- | | Restack --- (C) 2025 Kevin Erdmann 548 Market Street PMB 72296, San Francisco, CA 94104 Unsubscribe