Currently, low unemployment and mortgage rates are to the advantage of the homebuyers. The amount of homes purchased in 2019 skyrocketed in comparison to the past three years. As a result, there is excess demand for houses and not enough supply. In fact, the inventory of existing homes are at the lowest point since 1982. Therefore, many individuals who want to take advantage of the favorable housing market have decided to build their homes from the ground up, which has hit a 13-year high.
Certain economists argue that there are positive external benefits for building homes for scratch, particularly in low-income communities where gentrification is on a rise. Three economists have determined that building one large new apartment complex in a low-income community actually reduces rent costs within 800 feet of that property. While this result is not consistent with the theory behind gentrification, the justification for this result is that the newer buildings attract relocating workers, which prevents current landlords from pricing out existing residences.
There are two very important questions that can be gathered from this. One, does an individual's right to own property justify building new homes even in areas where building more residential homes can be problematic for the local environment? Does the problem of gentrification interfere with individuals property rights (as discussed in class)? A link to the relevant article is below: \
https://blogs.wsj.com/economics/2020/01/23/newsletter-the-number-of-homes-for-sale-is-at-a-record-low/
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