LEILA FADEL, HOST:
If you're looking to buy a new home right now, chances are you're struggling. Stiff competition is squeezing out many would-be homeowners and high demand, along with low inventory and high home prices, is making for a chaotic spring selling season. Joining me now is Neil Irwin, the chief economic correspondent for Axios. Thanks for being on the program, Neil.
NEIL IRWIN: Thanks for having me.
FADEL: So tell us more about what's making this housing market so dysfunctional.
IRWIN: So we have a collision of factors coming together all at once. And unfortunately, they all point the same direction, which is for a frustrating experience if you're on the buying side of a transaction. So one is a kind of long-term demographic trend. The millennial generation - very large generation - is hitting its peak years for - peak ages for homebuying and kind of building a home and life together. You have - also, on the demand side, mortgage rates have risen quite a lot this year. So we're approaching 5% on 30-year fixed-rate mortgages - first time in quite a while. You know, that's actually escalated in the last just 24 hours, as we've seen long-term mortgage rates rise or long-term interest rates rise in the bond market.
And then on the supply side, you have real problems. Homebuyer - homebuilders are struggling to get the inputs they need to build more houses, and that includes things like HVAC equipment, appliances, windows, garage doors. And so, you know, should they have a hang-up and can't get something because of these supply challenges that are true across the economy, they can't finish that house and put it on the market. So you combine all those things at once - it's a very hard moment for trying to buy.
FADEL: That's a lot. And why this collision of all these factors right now? Why is it happening now?
IRWIN: So part of it is the same story we see across the economy, which is we have a - you know, job growth, incomes are all rising. At the same time, we have a situation where supply has not come back from the pandemic as quickly as I think we'd all hoped it would. So you have high demand and limited supply across the economy. You see it in cars. You see it in all kinds...
FADEL: Yeah.
IRWIN: ...Of durable goods like, you know, washing machines. And we certainly see it in housing. It is interesting how all these things are part of the inflation story, including the mortgage rate side of things. Because what's happening on interest rates is the Federal Reserve is trying to raise interest rates, tighten the money supply. That is, the goal is to reduce inflation in the future. The way they do that is by trying to reduce demand to come more in line with what the supply capacity of the economy looks like.
FADEL: Why can't builders of new homes meet the demand from potential buyers right now?
IRWIN: So part of it is what I was describing...
FADEL: Right.
IRWIN: ...These same kind of supply headaches that we're seeing throughout the economy tied to the pandemic, the reopening, the kind of strains of shipping networks and all sorts of things like that. There is also this aspect of a longer-term problem, which is the places and localities that are most in demand - where there's the most jobs, the highest incomes - have tended to be very restrictive in what they will let people build. And so at the same time, you have - builders have a hard time finding land where they can build with sufficient density. They can't - once they have that land, it's hard for them to get the supplies that - it doesn't prevent them from building, it just slows everything down. And, you know, you can't sell a house without a - without kitchen appliances, without...
FADEL: Right.
IRWIN: ...An HVAC system, without windows. So if even one piece of that mix is hard to get and takes an extra few months, that house stays off the market for another few months.
FADEL: Neil Irwin, chief economic correspondent for Axios, thank you so much.
IRWIN: Thanks, Leila. Transcript provided by NPR, Copyright NPR.