The Housing Crisis and Inflation: Barriers to the American Dream

Jan 10, 2025

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Economist Bob Frick joins us to talk about how the housing crisis and inflation and how they have become barriers to the American Dream. Bob draws from his unique background as a financial journalist and behavioral economist to address topics such as labor market dynamics, credit card debt, and more. Bob emphasizes the critical shortage of housing and potential economic impacts of policy changes, and their possible inflationary effects. We also talk about the interplay between economic growth, housing supply, and affordability.

We discuss...

Bob Frick shares his background as a financial journalist and behavioral economist, focusing on consumer issues like housing, cars, loans, and credit cards.
Potential inflationary effects of policy changes, including tariffs, deportations, and reductions in legal immigration.
Wage inflation, which has risen since the pandemic but struggles to outpace the cumulative effects of high inflation.
Credit card debt trends, including rising balances and late payments, with potential stabilization observed in recent months.
The lack of affordable starter homes, with rising median homeownership ages and unaffordable prices for younger buyers.
How post-COVID low mortgage rates drove demand, compounding pre-existing housing shortages and resulting in skyrocketing home prices.
Current housing market sales are only a quarter of pre-COVID levels, reflecting affordability and inventory issues.
Low-interest mortgage rates from previous years contribute to a "lock-in" effect, discouraging homeowners from moving.
Builders and flippers have reduced activity, with fewer properties meeting profitability thresholds.
Inflation and rising mortgage rates exacerbate affordability challenges, especially for lower-income households.
Labor market conditions remain strong but are often misinterpreted due to volatile reporting and outdated measurement methods.
Economic forecasts are inherently unreliable, influenced by cognitive biases and behavioral tendencies toward belief in prediction.

For more information, visit the show notes at https://moneytreepodcast.com/housing-crisis-and-inflation-bob-frick-676