Modern Housing Supply and Future Outlook

This is a new era of American innovation. Color Health supports early cancer detection and treatment with Google AI to help improve patient outcomes. Learn more at g. co slash American Innovation My parents own a home I'm a homeowner. My sisters are homeowners. Land ownership was just something that we understood was part of the American dream for us For over a hundred years The U. S. government has helped everyday people pursue homeownership. It is this Awesome challenge But now this core part of the American dream is starting to feel more like a fantasy. And many people wonder if their own kids will have the same shot When I close my eyes, I want to know that he has his own home As an affordability crisis plagues the housing market, The federal government once again put homeownership within reach It's Sunday, june twenty eighth Imani Moise for the Wall Street Journ This is USA two hundred fifty a podcast series connecting America's economic present to its past This is the fifth and final episode ownwning a pce of America. Now know we that there is therefore granted by the United States unto the said Peter Clarkke The track of land above describes That's Bernice Bennet She's reading a deed from eighteen ninety six, signed by President Grover Cleveland. bestowing one hundred and fifty nine point three three acres of land in Louisiana to her great great grandfather, Peter Clark. who just years before was enslaved. I had chills when I opened it and I saw his name, his age and understood that, wait a minute, he went through this process And he acquired that land It's just told me that this man born ens sllaved was definitely determined to own land Peter acquired the land at the ripe age of thirty eight through the Homestead Act of eighteen sixty two, which granted citizens or wanna be citizens of the United States one hundred sixty acres of federal land for a small fee You have a receipt Because he had to pay money, eighteen dollars ahead the catch. You had to farm that land for five years They called it proroving it At the time home and land ownership was an exclusive club made up almost entirely of wealthy white men. But that was about to change. Just about anyone could make a claim under the Homestead Act of eighteen sixty two. as long as they hadn't taken up arms against the US. peopleeople came from all over. B ship, by train, by horse and buggy There were men, single women, and even black Americans recently freed from slavery. One historian has called it the most comprehensive form of wealth redistribution that has ever taken place in America It helped support the notion that pooor people could if they worked hard, could rise in society That's Rick Edwards. the director emmeritus of the Center for Great Plain Studies at the University of Nebraska Before Americans ever dreamed of owning a home The key to building wealth in this country was through land. Well, in a farming society, the biggest asset you had was the land you owned or rented. And so the idea that If you move to this new area You could get land for free was a bonanza Edward says about three million people tried their hand at homesteading. including tens of thousands of Black Americans like Peter Clark And so it's the first piece of national legislation that did not restrict its benefits to But That's not all Hundreds of thousands of immigrants and single women heeded the government's call to the West. In fact, it was a really beneficial law to immigrants that encouraged immigration. i That's Jacob Freefield, Director of the Center for Lincoln Studies at the University of Illinois, Springfield He's also kind of like Edward's protege And together, they've literally written the book on homesteading And another thing you get is women claiming land too. It's progressive in that way. that women are allowed to claim land in their own name But as egalitarian as the act was It was only made possible through dispossession. Before America's homesteaders could settle the prairies, tens of thousands of Native Americans were pushed out Success wasn't guaranteed either Homesteadters arrives on a treeless prairie in the Great Plains The only way to build a home was to quite literally dig up the ground beneath you and make heavy bricks out of dirt, grass, and roots. Sometimes people complain that snakes would come in out of the walls because you're building your house out of their home, essentially. Homes setetters also had to answer to Mother Nature One family from North Dakota spent three years building up a prosperous farm, but in one day Fire tore through the prairie, burning their home, their barn, their livestock, and all of their crops And again This was the early twentieth century. They couldn't just call State Farm Of course they had no insurance There was N a practice of having insurance at that point. And so after three years of very hard work building their farm They had to start all over again and banks for no help either. To get a loan, you needed a deed And you couldn't get that deed until after you proved up That was the thing about the Homeset Act The government gave away this wild land, but it didn't help you tame it Homesteaders joked that the government bet you one hundred and sixty acres that you wouldn't last five years. And more than a million people couldn't hack it peopleeople like Solomon Butcher, a photographer from Lincoln, Nebraska He lasted two weeks. After two weeks, he said it was too hot buuggy and too dirty And so he returned to Lincoln and took up his photography business again, thank goodness, because he gave us some of the most wonderful penetrating photographs of homesteaders in the eighteen eighties Photos are incredible They're black and white, but they paint a vibrant picture of prairie life. They're mostly taken outside away from the homesteaders's dirt homes One woman who was from Boston had Men carry out her Orgon into the pasture in front of the house so that people back in Boston could see that she still was somebody with culture So here are people who are striving to create a new future for themselves. And What we find is that they're very proud of the accomplishments they have made. They don't look like people who are downcast and depressed. They look like, hey Look at us. Look at what we have Bernice Bennett thinks her great great grandfather would have felt the same way Ownership was important I think economically, spiritually, it made it part of family dialogue would be that you need to own it, donon't rent it. if you can, own it. Freefeld and Edwards say that out of the three million people who stakeed a claim, more than half eventually own land outright. And their descendants are now in the tens of millions. I think the idea that this incredibly important social policy touched not just so many Americans in the ninetent centies gave opportunity to perhaps ninety million Americans to the present I think it's just Awesome legacy that I think is often overlooked when we talk about American history The Homestad Act was instrumental in developing the West and giving many poor people a shot at a better life But still By the turn of the twentieth century The US was a country of renters. when we come back how the US finally transformed into a society of owners The deal replaces fragmented payroll vendors with one global system, no third parties. Hire manage and pay teams in one hundred and fifty plus countries. operate like a local, everywhere. Visit dEl dot com slash wsj For the first four decades of the twentieth century, the homeownership rate in the US never topped fifty percent That all changed after World War II When the war ended in nineteen forty five Millions of soldiers returned to the U.S He returns with a new sense of responsibility of initiation. New skills acquired with old skills sharpen And they needed somewhere to live It just sort of lit a match and the housing market just took off Ben Eisen runs the personal Fance Bureau at the Wall Street Journal And he's actually in the midst of writing a book about the rise of the American mortgage market. You had these people C were starting families, they needed bigger homes. they didn't even have homes. Some of the descriptions of what it was like for these GIs returning home at the time. they were living in church basements and chicken coops, there was just such a demand for housing that they couldn't build fast enough. Enter home builduilder, William Levitt. Bet known as Bill What we've come out with is something new in city planning W born in Brooklyn Bill was a total character He stood five foot eight but told everybody he was nearly six feet tall. CMBC didn't exist at this time, but if it existed, he would be on it like every single day shouting from the mountaintops and talking about the economy and talking about his business That's just who he was. Bhill took over his dad's construction business with his brother Alfred And the two sons were ambitious They bought thousands of acres of cheap, untouched land in what would become America's suburbs Today at the eastern extremity of the state of Pennsylvania, A remarkable construction project is transforming the face of the countryside You had people like William Levitt figuring out how to mass produce housing on an incredible scale That's Ed Glazer, an economics professor at Harvard University This combination of the availability of extra land due to the automobile with the manufacturing genius taking techniques that Henry Ford had put in his moving assembly lines and then bringing them to housing construction, this sort of method where that the plumbers and the carpenters would just go up and down a street adding their little bit to each house as they went. That was sort of an amazing period in terms of post war America of just making ordinary housing available to Mid income Americans The houses in these levt towns were not like today's McMansions They were tiny about seven hundred and fifty square feet and cookie cutter, mass produced in just twenty seven steps The four models vary slightly in overall design But each has the same number of rooms. Two bedrooms A large living room, part of which can be converted into a third bedroom They cost about seven grand in nineteen forty eight, which is about ninety two thousand dollars today Even back then, this was an incredible deal Overall, Levid and Sunons built more than one hundred forty thousand of these homes, making it the nation's largest developer in the nineteen fifties and sixties notot one to be humble Levitt called his company the General Motors of the housing industry But how did he do it with the backing of Uncle Sam Bill Lev it in his own words. You know, ours is the only business in the world that has every single branch of government as a partner. And I meet every branch, federal, state, county and municipal you know the One of the big ways the federal government helped was by guaranteeing mortgages Real estate is a very speculative industry, right That's Wall Street Journal editor Ben Eisen again you enter into a multiyear project not knowing if there's going to be demand at the end of the line or if you're going to recoup your money. but The risk to the project went down so tremendously when they already had prepproval to sell these homes with FHA mortgages attached to them to rewind a bit FHA mortgages. came out of the Great Depression. when the economy and the housing market cratered. To stop the bleeding, the government created the FHA or the Federal Housing administration to stabilize the mortgage market It's hard to express just how unprecedented this was. Before nineteen twenty nine, the federal government wasn't really involved in housing finance What you had was a very regional piecemeal kind of market where the products looked very different in all different parts of the country. The interest rate in one place might be two percentage points different than somewhere else A lot of people took out short term loans where they only paid interest, meaning the entire principal was due in one lump sum when the mortgage term ended If you weren't flush with cash or couldn't refinance, you were sunk What prevailed at that point were mortgages which were known as Balloon mortgages or evenven more descriptively bullet mortgages That's Susan Walkter a real estate professor at the Wharton School She says when the government got into housing, they effectively guaranteed the whole system. introducing and backing Long term Fixed rate mortgages with payments that covered interest and a portion of the original debt. The entire housing finance system was reinvented And it was reinvented in a way to make it safer more sustainable alsoso and this is key more affordable And by the time Levit came along Millions of Americans could access the new thirty year mortgage we all know today product as American as apple pie. The American mortgage is a unique mortgage. It's unique in several ways First, it has a rate that stays the same over the life of the loan notot just two or three years most other countries The rate changes with interest rates in the overall Without this protection, American homeowners can suddenly find themselves paying hundreds of dollars more each month if interest rates rise What also makes the American mortgage unique is that it can be prepaid So while There's no threat of interest rates going up. If interest rates fall Borrowers can refinance prettyret inexpensively Another big difference in the United States is most mortgages are non recourse Meaning, in the very worst case, you only lose your home if you can't make payments But in many countries, in fact, in most countries, Even if you lose your home because you can't pay back your mortgage If there's anything outstanding, and usually there is then your wages get garnished. So this is something which is very important to U. S. economic democracy The ability to start over Between nineteen forty and nineteen sixty, the country's homeownership rate grew nearly twenty percentage points. thans in large part to these affordable mortgages But not everybody enjoyed this post war housing boom When the government got involved in guaranteeing mortgages, it needed a way to standardize lending So it created color coded maps. Green often meant good to go Same with blue Yellow was a little more suspect. But Red Redent risky If you were in those areas, you'd have a hard time getting al loone Today, we call this redlining. And we know that most urban black neighborhoods fell into this red bucket. Meaning that black people were effectively cut off from credit, a key way to build wealth And on top of that, Levit's early deeds barred non white people from living in his developments and That was a nightmarish component of the American dream because not everyone could move to these newly inexpensive, affordable Beautiful suburbs where you could commute to your job, short commute. and bring you up your children with a yard and with no threat to your Future liivving Instead of buying in Levt toowns, Black Americans bought where they could in cities As white Americans left for the new suburbs in drobes But by the early nineteen eighties, nearly two thirds of Americans own their homes And by two thousand four, we hit a peak. sixty nine percent But then it all came crashing down So what went wrong And where do we go from here That's after the break Peter Clark's great, great granddaughter, Bernie Bennet She is my one and only mother. That's her son to White Bennet Bernice believes she owns her home today because of her ancestors's early shot at ownership But Duwite has grown up in a different era So I'm fifty one years old And I do intend to workk, well pathed sixty seven But A thirty year mortgage. don't I don't intend to work until my eighties to pay off the mortgage so that now makes me rethink possibility of even purchasing The wife's not alone Last year, the share of first time home buyers was just twenty one percent A historic low And the average age hit a record high of forty So how do we get here An ownership society is a compassionate society In two thousand two President George W. Bush set out an aggressive agenda to create millions of new homeowners. Achieving a goal. require some good policies out of Washington And it's going to require a strong commitment from those of you involved in the housing industry Everyone jumped in Builders ramped up new construction. invvestors gobbled up securities backed by mortgages and lenders race to feed the machine But instead of offering the safe government backed thirty year fixed mortgage, more lenders started hawking the modern day equivalent of bullet mortgages adjustable rates one to two year terms, interest only, and ballooning principles. One by one, we destroyed these sustainable factors And we were back to the bullet loans of the Great Depression. Susan Walkter from the Wharton Sool again. they transformed the American mortgage from a safe, sustainable instrument to a toxic risky instrument not only to the borrowers, but to the overall economy These, let's say, creative mortgages worked fine as long as home prices went up But when prices began to fall, Well We remember what happened. The American financial system is rocked to its foundation. What happened was the lending was so loose. The increase in people with high risk mortgages and now this week The record number foreclosure twelve million households now owe more than their homes are worth Crash didn't just wipe out homeowners. it devastated home builders too Half of developers disappeared in the wake of the Great Recession Here's Ed Glazer again. One way to think about this is if America was building at the same rate Between two thousand and twenty twenty that we did between nineteen eighty and two thousand America would have fifteen million more housing units Glazer says that we just haven't built enough units since two thousand eight And homeowners who locked in rock bottom rates during COVID are reluctant to sell You see the combination of high prices and high mortgage rates, which makes things pretty brutal for anyone who wants to buy in In fact, the median home price last year was nearly five times the median household income Three times is considered affordable It's at a point where almost everyone agrees that the housing market is broken Younger Americans don't feel like they've got a great stake in the system President Trump has floted the idea of a fifty year mortgage to help lower monthly payments But experts say financial engineering alone won't solve a supply problem Economists are able to differentiate demand shocks from supply shocks by looking at the combination of prices and quantities And what we know in housing is that prices are way up And the quantity built is way down That's not compatible with any demand side story. That's compatible only with a supply side story. This past week, the president delayed signing the government's most ambitious housing legislation since the eighties In a rare moment of unity, Democrats and Republicans had come together to tackle the inventory issue by easing federal regulations and incentivizing local governments to increase home buildilding oping us from Building like William Levitt again Well, it's almost impossible to imagine what community is going to let you do that Glazer says today's neighborhoods have essentially closed their doors to newcomers Over time Housing morphs from being like a electric toaster, which you just spit out of the factory whenever you need it to being like a remembrandt, like a precious object that no one's making any more of it. You've got to become a country for outsiders again, not just a country in which insiders get to freeze the community at exactly the level that they want when they bought it. Until those barriers are removed, it's unlikely people like Dwite Bennett The great, great, great grandson of homesteader Peter Clark. will get homes of their own I think what I probably did is move back to my parents' place That will be my home. So the home of my childhood That will be the home that in my lights in I'll use my cash to help my daughter Bye first help with herrapy like many American families, The Bennetard view home ownership as something more than just a place to live. Al met You know, that you've achieved Sorry. of the American dream And Unlikely that that I'll have that experience And that's it for the special edition of What's News Sunday for june twenty eighth. USA two hundred fifty, owning a Pace of America, was produced by Alexis Green, with supervising producer Jenna Harron Additional support from Chris Sinceley Sound Design and mixing by Michael Lval. Fact chehecking by Aparna Nathan Special thanks to Angela Bates, a descendant of America's original homesteaders Michael Laal also wrote our theme music Aisha Al Muzlim is our development producer. And Chris Dinsley is our deputy editor. I'm Imani Moise, and that completes our USA two hundred fifty podcast series Links to previous installments are in the show notes Watch News we willll be back with a new episode tomorrow morning. Thanks for listening. The spirit of innovation is deeply ingrained in America, and Google is helping Americans innovate in ways both big and small Access to quality cancer care can be a barrier to early detection Color Health's Virtual Cancer Clinic, built with Google AI, helps accelerate the care process from screening through treatment and survivorship to improve patient outcomes. This is a new era of American innovation Learn more at g d. co slash American innovation.