welcome back to morning brief brought to you by Invesco. We've got the latest reading out on housing this morning. Home pures rising 7% from year ago, setting a new record high in April as the market remains tight, and higher home prices. Will they continue to exacerbate the nation's affordability crisis? In an exclusive interview, Treasury Secretary Janet Yellen had this to say about the housing market in America: I don't want to say that there's a silver bullet. I think we look to Congress to do much more. President Biden has proposed a program that would lead to the construction of 2 million new housing units, which would really make a sizable dent in the problem that we face. Here to weigh in, we want to bring in Brad Case joining us at the desk. He's Middleberg Community's Chief Economist. And Brad, let's start there with what we just heard from Secretary Yellen when it comes to the fact that she said there's no silver bullet to address the nation's affordability crisis.

the policies that have been laid out by the Biden Administration. Are they helping at all? Why or why not? Or what more needs to be done? So yes, I think, I think what she's announced is a very good idea. You have to keep in mind two things. First of all, the biggest driver of high housing house prices is a big increase in demand, and that's coming from several sources. One of it is just people moving out of living with friends and getting their own place. There's also immigration, there's a lot of migration to especially the southeast. So, demand is driving this growth in house prices, and the solutions really are mainly at the local level. So, what the federal government can do is kind of limited, but the proposal that she talked about really does nail what the federal government can do. I think that will be helpful. You know, it's interesting because demand is one component of it, but it's also materials, those are higher labor that costs more, you've also got

more favorable land especially as potential homeowners are looking at 15 or 30-year mortgage rates and trying to figure out, Okay, what do I feel comfortable in terms of the property that I'm buying into, making sure that it holds up over that time when you're thinking about some of the hottest Summers on record that we've been tracking over these past few here? So, how is that all playing into the equation too from what you're tracking? Well, when you think about the mortgage interest rate piece of it, I mean, that's a situation where we're kind of stuck, okay, because yes, mortgage interest rates are high and that's preventing some people from buying. It's also preventing a lot of people from selling because they're going to buy into a different house at a different mortgage interest rate. Um, but at the same time, the house prices are very high, and that goes back to the demand part. So, what's going to bring down affordability in the owner-occupied part of the market if you bring down

interest rates all that does is make house prices go up more and that wrecks affordability what you really need is some moderation in house prices and the only way to get that is Supply growth but we need Supply growth on the rental side of the market as well as on the owner occupied side of the market and part of the reason for that is that we think that we're we're witnessing a shift to uh among households to prefer renting for longer and that's because For the First time they've had the opp opportunity to uh rent professionally managed well-built single family houses instead of having to buy a house if you want four walls in a yard um you you're able to rent it and what that means is you're not being forced to buy into something that maybe you'll want several years from now you're you're able to rent something that you want right now and then move into a bigger rental place or an owner-occupied house later on when it makes sense for you when should we expect to see some relief when it comes

to pricing well we we are seeing uh some relief uh when you look at the at you know you showed the house price uh appreciation numbers that came out this morning. They're still very strong year-to-year. On the rental side of the market, rent growth over the last year has been very close to zero, maybe even below zero depending on which part of the market you're looking at and which data source you're looking at. So that part of the problem really has been solved. Um, uh, but we need to continue developing more rental housing in order to make sure that prices, that rents don't clip, don't uh, creep up again because demand is still growing. Whose fault is high home prices? I mean, Millennials get blamed for everything these days. Is it, is it our fault that we're not buying into homes that we we can't afford right now, uh, even despite family formation that might be happening or job relocation, whatever the factor of the input is. No, I would say the real problem and the reason that what

secretary Ellen uh talked about yesterday is so important is because the fault is is the the cost of developing new housing at all levels of all types in all areas. But the result of that is that only the most expensive housing gets developed. We have to make it possible to develop and it doesn't need to be what we call Affordable housing you know you know um with uh with markets with subsidies and that sort of thing. It just has to be housing for normal people housing for regular people and that is very difficult to develop. So it's only the most expensive things that get developed and therefore the the price of the house goes up even though the people don't want those expensive houses what they really want is moderate houses. Brad case always a pleasure to speak with you and get some insights and perspective. Brad Cas who is the middleberg community's chief Economist joining us here in studio all the way up from Virginia here today thanks so much oh it's my pleasure to be here.

The real problem with real estate, according to an economist

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