Cutting Edge Insights
with Dr. Lee

Ask and ye shall receive

My cell phone rang during my lunch break.

Looks like a local number…low robocall risk.

Then again, I’ve been spammed by robocallers using local numbers.

I answered it anyway.

“Do you have any 3-bedroom rentals?” asked the desperate-sounding woman on the other end of the call.

I knew that my cell phone number was on my real estate development website, but I didn’t think we were advertising any rentals…I knew the rentals that we had were currently full.

“No, I’m sorry, we don’t at this time,” was my reply.  Then, curiously, “In case I stumble across something, what is your budget?”

“We’d like to be at $1,000 per month,” she said.  Then, “But if necessary, we can go up to $1,100 or maybe even $1,200.”

Wow.  A few years ago, the local market would hardly bear $700-800 for a 3-bedroom rental home.

Inflation is here, and it has been here for some time.  And my guess is that it’s here to stay.  We’ve written about it several times – check our archives at

But this article isn’t about inflation.

This article is about one facet of our national housing shortage.  “You get what you reward” is the old tenet of operant conditioning, a term from high school psychology class.

This applies to our modern society on several levels – the government provides incentives vis-a-vis the tax code, and smart investors reap the benefits and gain the incentives by providing what the government wants – housing, infrastructure, etc.

Parents reward good behavior of their children with whatever they feel will give them the best chance of their children actually practicing good behavior.

Businesses reward good production and stats with bonuses, monetary or otherwise.

Again, we get what we reward.

Q: What does this have to do with the housing shortage?

A: There currently is a bill under consideration by Congress to incentivize new home buyers up to $15,000 (subject to certain limitations).

I think it’s fantastic to incentivize home ownership, due to the pride of being a homeowner, the connection between home ownership and financial success (NOT causation – we’ll discuss this next week), and the tax advantages.  And the forced savings account that a mortgage is. And the inflation-powered debasement of debt. And the superpower of leverage – stronger than compound interest.

Ok, you get the picture.

But are we incentivizing the right activities?

As of his writing, there is hardly a home available to purchase.  If there is, then it’s on the market an average of 8 days before being placed under contract.

There are bidding wars.

Homes are being sold over asking price.

Homes are being sold without inspections.

The national inventory was down in excess of 20% from April 2020 to April 2021.

Housing starts were down 13% in April 2021 (likely due to the lumber shortage/increase in price).

Oh, you want to look at houses at a higher price point.

Ok, come back tomorrow…I guarantee the same house will cost more tomorrow.

It’s crazy out there.

In my opinion, home buyers are already incentivized by decades-low interest rates.  I’m not opposed to incentivizing home ownership further, but economically I don’t feel it is our nation’s best maneuver at this time.

Congress ought to incentivize home production – in essence, incentivize builders to build more houses.  And incentivize the lumber mills to produce more lumber.

Incentivizing those activities would solve more problems for more people by relieving congestion that has built up within the housing market.

I’m sure those thoughts have crossed some politician’s mind at some point, but I wonder why the idea did not persevere and gain any significant traction.

As you think about that, remember that we get more of the activities that we positively reinforce…as well as the side effects of those activities.

If we use our heads, we can channel our efforts toward activities that will pave the way for progress and improvement…or we can watch the bubble continue to grow.

Until next time,

Dr. Lee Newton

As always, I give ideas – not advice.


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