There is a lot of talk in the news about affordability, with housing being a big part of that. It's a sticky problem. Bringing down the price of homes is impossible and actually would not be a fun world to live in if you could. Even dropping interest rates has drawbacks. Bringing down home prices to address affordability might sound like a straightforward fix—but the reality is more layered and deserves a closer look.
Prices
Home prices are driven by supply and demand. If we somehow force prices down, say, with a bunch of new home inventory, that may increase affordability for buyers in the short term—but it risks discouraging sellers from listing their homes, if it means they stand to lose money. If sellers can’t make back what they paid (plus improvements), they may simply choose not to sell. That stagnates the market.
Why Prices Aren’t Dropping
We’re currently in a kind of market limbo where supply and demand are pretty balanced. Neither buyers nor sellers have the upper hand, and that’s keeping prices stable. So while people want more affordable housing, there’s no downward pressure strong enough to move prices much.
Interest Rates
Another way to make homes affordable is to lower interest rates. My feeling though is that lowering interest rates by a lot, or rapidly, will overstimulate demand (and there is plenty of pent up demand!) and drive home prices much higher. You remember the years of double digit appreciation. Also not a fun place to be.
So What Can We Do?
Instead of hoping for prices to drop, a better path might be some of the things currently being explored:
- Yes, building some more housing: Especially missing middle housing like duplexes, triplexes, and ADUs. But not flooding the market!
- Supporting first-time buyers: Down payment assistance, low-interest loan programs, etc.
- Zoning reform: Loosening single-family zoning restrictions can make way for more diverse, affordable housing types.
- Creative ownership models: Like community land trusts or shared equity programs.
If you’re a buyer waiting for prices to come down, that may never come. Sometimes the better strategy is to lock in today’s price—even if interest rates are higher—and refinance later if rates drop.
We probably shouldn't try to artificially bring prices down... and I don't even see how that would be possible. But we should push for policies and innovations that make it easier for more people to participate in the market.
