NAR just created and released a new metric called the Realtors Affordability Distribution Curve and Score. It’s a unique metric; but I can’t find what data they use for household income, down payment, interest rate on a loan etc. But, this metric definitely reveals a big imbalance between what potential home buyers can afford and what is listed for sale as there is so little entry level housing for sale.

A score below 1 is “bad” and a score above 1 is “good”. Colorado has a whole scored 0.65, about the 6th lowest in the country. The most affordable states are Ohio, Indiana, Kansas, Iowa, and West Virginia; but they are affordable because no one wants to live there and people are leaving. Many of these states’ residents are moving to Colorado. Thus, affordability is maybe not such a big deal?

People adapt and adjust. For example, I had a middle-aged lady look at one of our rental condos last week. She moved here from Alabama 2 years ago. Now her Mom and her best friend are moving here from Alabama too. And it will take all 3 incomes in 1 household to be able to afford living here. But, Denver has many more opportunities for growth and a better lifestyle she told me.

Lawrence Yun cited 3 solutions for our housing affordability “crisis”—we need to get more homeowners to sell, we need RE investors begin selling their properties, and we need more single family construction. He’s correct; but how we can cause these solutions to happen?

Well, nine years ago our federal government gave out tax credits to encourage people to buy a home and it worked. Should the government do the same thing, but this time for people who sell their home? Maybe the government pays a homeowner’s closing costs to sell a home and their moving costs to incentivize homeowners to sell their home? This is what private companies and the federal government do already to encourage employees to take new jobs in a different part of the country.

Second, maybe some RE investors would sell if we altered the tax code by waiving the depreciation recapture tax and capital gains taxes for a year or two. But, I am afraid that this idea would never pass in Congress because it would look like Congress is favoring or allowing the “rich to get richer” without paying more taxes.

To cause more home construction to happen will require big changes in our schools and as a society. But, maybe the tax code can be used to incentivize people to enter the industry by paying for training, maybe paying off student loans from other pursuits, etc.