... we flooded the country with 30 million illegal immigrants who were taking houses that ought by right go to American citizens ... Under the Biden administration, the price of a new home literally doubled in four years. ...
-- The ever-ridiculous J. D. Vance, here
Hysteria is everywhere on this issue.
Owner-occupied housing is hardly higher today than it was at the 2020 peak.
Buyers became hysterical in 2020, seeking isolation. Vance is hysterical in 2025, playing immigration politics. The Fed went hysterical in 2008 slashing interest rates, and it took fourteen years and pandemic-related inflation just to get them to snap out of it.
The Fed's ZIRP after the Great Recession drove down mortgage interest rates to sub-five percent, averaging less than three by 2021.
As everyone knows, when you lower the long term price of a mortgage, you can "buy more house".
That's the major culprit driving prices higher, making housing more expensive, that and the 2-year rule. It took more than a decade of zero interest rate policy to bring us to this pass. It has not been and will not be remedied overnight, especially by its new cheerleaders in the Trump administration.
Cutting interest rates will only make housing more expensive.
New housing is indeed soaring, but people need to get a grip. The median sales price of all housing in the United States is up 30% since 2020, not 50% like it was in the five or six years right after 2008.
A better government tax policy on housing is called for. The biggest problem is that the mere 2-year owner-occupancy requirement for capital gains tax exclusion has turned housing into a commodity since 1997. It was a big mistake to make housing so fungible. The answer lies in applying the brakes to that, so that the emphasis is on housing as a home as opposed to as a speculative investment driving prices for all types of homes irrationally higher.
The old policy allowed the exclusion only once in a lifetime. You sold your house when you retired and enjoyed life living off the proceeds mostly tax-free, usually in a down-sized arrangement or as a renter. Otherwise during your working life, when you had to sell to move, you had to purchase at least sideways, or up in price so that your gains went into the new place, not into your pocket. That's how housing became such a tempting source of pent-up capital in the first place. There was an incentive to maintain a ladder of housing values upon which people could move more freely, mostly up but also down.
We need to go back to some form of that arrangement.
But our leaders seem to have no imagination for it. They can't see that what we did in 1997 was a revolution. A bad revolution.
Sad!
