I agree with you in principle. Since the 2008 crisis, previously developer-friendly mid-sized Sunbelt metros have adopted some NIMBY building restriction policies that would make even coastal California blush.
But so far, that hasn't really created a housing affordability crisis... yet. A lot of the impact has been mitigated by falling mortgage rates and rising wages. Let's just take Tampa, as one of the hotter housing markets. Since 2014, median listing prices have gone up 57%.[1] Adjusted for inflation[2], that's 49% real price growth.
But over the same period, average mortgage rates have fallen from 4.49% to 2.95%[3]. Meaning for the same house cost, the monthly payment on a 30-year fixed mortgage has fallen by 18%. In addition national median incomes have gone up over the period by 10.5%[4]. (And almost certainly more in Tampa specifically.)
Therefore housing affordability has only declined by about 14% for the median household in Tampa. All during an extremely hot housing market. Again, that's still indicative of some recent bad NIMBY policies. If housing supply was perfectly elastic, things like lower mortgage rates and higher wages would benefit consumers instead of inflating property prices.
But there's no indication that housing has become drastically more expensive in "flyover country". This conclusion can be spot checked by comparing national consumer expenditure surveys over time. The percent of after-tax income spent on shelter has actually slightly declined from 17.8% to 17.0% during the 2013-2019 period.[5]
Economic opportunity is a big part of deciding where to live. Just like people migrate to America because there is a higher probability of securing security and economic advancement for their descendants, people do the same within the US.
In decades past, this might not have been so evident because the entire US was growing and opportunities were available everywhere, but as the disparity of economic growth between regions of the US diverges, it makes sense for people to value real estate in those regions more. And if you think the disparity is going to grow in the future, then you might be willing to risk even more to buy in.
Really cost of housing alone doesn't tell the full story without considering the jobs/income sources in the area.
I have noticed an irony that if housing in an area is really cheap you probably won't be able to afford to live there unless you are already a retiree who doesn't care about long emergency response time - because the highest paying job in the area is say a resturant manager at the local diner.
Before the pandemic economic growth was very urban concentrated - remote working normalizing might reverse the trend but there are still some service and infastructure demand constraints - chances are they need reliable high speed internet.
Can you name some? I would gladly leave my HoL city for a cheaper one with great job opportunities in technology (not necessarily at a tech company) and cheap housing. The only city that seems to have all those things is Minneapolis. Even Atlanta is fairly expensive at this point.
I work at Aberdeen, MD making 141k. I got an offer once for 155k from a nearby military base not long ago. I've seen houses nearby for 180k. Pretty easy to save here if you're ok with Gov beurocrac. Easy to get a new job, too.
The mortgage isn't the only cost. Interest is tax deductible. If you make decent money, you're better off with higher interest, lower house prices, lower insurance prices, and lower property tax. Let's not forget that debt does need to be repaid. Interest rates will likely never normalize, but anyone taking out 4-5x their income in debt, should at least be a little worried if they do...
Take Dallas Texas as an example. It wasn't affected very much by the 2008 bubble (probably because of high property taxes). The median price in 2000 was ~$100k and is now ~$240k [1]
Interest rates in 2000 were 8% [2]. They're currently 2.94%.
WOW! House prices are cheaper today! Not really. Let's take taxes into account.
Property taxes:
=240000 * 0.0208/12 # TODAY
$416
=100000 * 1.025^20 * 0.0208/12 # 2000
$284
Insurance is about $30 a month more today. And since the mortgage interest today is less than the $12k standard deduction, it probably won't get any tax benefit today. In 2000, it'd be about $100 a month.
But then there's the opportunity cost, too. Today your down payment is ~50% larger. The opportunity cost is about $100 more per month.
$1,004 + $416 + $30 + $100 = $1550 # TODAY
$1,202 + $284 - $100 = $1386 # 2000
It's only a ~12% difference. If you're in a more pricier market, the tax deduction was much juicier. Real monthly payments are ~50%+ more expensive. If you're an investor, cap rates are trash. Plus you're taking out debt to income that at any other point in history would seem insane.
The monthly payments aren't the big issue. The real trick is that by lowering interest rates from ~8% to ~3%, the Fed created $14T in real estate wealth out of thin air. That's where most of the inequality really stems from. For most people, their house represents the majority of their life's savings. If you're older and own a home, the Fed doubled your wealth. If you're younger and don't own a home, the Fed make increased your housing price by 5-20%, devalued whatever savings you had, and forced you to take on extreme levels of debt for a similar monthly payment on a house (which you probably don't have, because in real terms you need a ~50% bigger down payment).
But so far, that hasn't really created a housing affordability crisis... yet. A lot of the impact has been mitigated by falling mortgage rates and rising wages. Let's just take Tampa, as one of the hotter housing markets. Since 2014, median listing prices have gone up 57%.[1] Adjusted for inflation[2], that's 49% real price growth.
But over the same period, average mortgage rates have fallen from 4.49% to 2.95%[3]. Meaning for the same house cost, the monthly payment on a 30-year fixed mortgage has fallen by 18%. In addition national median incomes have gone up over the period by 10.5%[4]. (And almost certainly more in Tampa specifically.)
Therefore housing affordability has only declined by about 14% for the median household in Tampa. All during an extremely hot housing market. Again, that's still indicative of some recent bad NIMBY policies. If housing supply was perfectly elastic, things like lower mortgage rates and higher wages would benefit consumers instead of inflating property prices.
But there's no indication that housing has become drastically more expensive in "flyover country". This conclusion can be spot checked by comparing national consumer expenditure surveys over time. The percent of after-tax income spent on shelter has actually slightly declined from 17.8% to 17.0% during the 2013-2019 period.[5]
[1] https://www.zillow.com/tampa-fl/home-values/ [2] https://www.bls.gov/data/inflation_calculator.htm [3] http://www.freddiemac.com/pmms/pmms30.html [4] https://fred.stlouisfed.org/series/MEHOINUSA672N [5] https://www.bls.gov/cex/2019/standard/multiyr.pdf