Cardi B is Right. There Aren’t Enough Houses

An image of a home is used to illustrate an article about mortgage rates in New Jersey. Credit: Getty Images
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(This article was originally published in NextMove, our weekly newsletter on the housing market. Sign up for it using the box below.)

Cardi B is right about the housing market.

This is Jon Reed with NextAdvisor, and economists keep telling me that the reason home prices are staying so high is because the supply of available homes is far below demand.

But Cardi B said it more succinctly… and colorfully. The rapper’s profanity-laden Instagram live rant about the economy this month pinpointed the problem: “There’s no [bleep] inventory.” 

That’s been the case for years. It was the case earlier this year, when home prices were going up dramatically and you couldn’t buy a house without fighting off a thousand other offers. It’s still the case today, even as housing prices are stalling or coming down in some markets, because many buyers are now priced out by fast-rising mortgage rates.

The underbuilding of homes dates back to the Great Recession, putting us in the hole as we headed into the post-pandemic housing boom. And the changing economy doesn’t inspire confidence that things will get better. A survey by the National Association of Home Builders showed builders’ expectations for the next six months are at their lowest level since 2014, not counting the early days of the pandemic in 2020.

It would be great if the market could find balance by adding more homes for sale while demand stays high, bringing prices down a bit while allowing more people to find affordable housing. Unfortunately, we’re getting the opposite. Those high mortgage rates – the highest since 2008 – are making it much harder for buyers to get to the closing table, while the lack of inventory is keeping prices from dropping too quickly.

While that’s a good thing from an overall market standpoint – experts say we’re unlikely to see a precipitous drop in home values like we did in 2008 – it’s certainly no fun if you’re looking to buy.

Cardi B also nailed the main problem for homebuyers – the mortgage rate. (She also said this more colorfully.)

Your monthly mortgage payment is where the rubber meets the road. It’s what you need to look at when you decide if a home is affordable or not. The fact that mortgage rates have roughly doubled in the past year means your payment is 30% to 40% higher than it would’ve been for the same exact house. 

There are a lot of strategies you can use – negotiate lower prices, have the seller pay mortgage points, get creative with where you look for a home – but let’s be honest, not everyone can afford a home today. A lot of people are on the outside looking in.

What should you be doing if you can’t afford it now? Position yourself to be able to buy later. Here are a few steps you can take:

Work on your credit score. Lenders are going to look at your credit score and debt-to-income ratio when you apply for a mortgage. The market may not be right for you to buy a home right now, but it’s always the right time to pay down high-interest debt like credit cards. 

Make practice mortgage payments. You may have a good idea what kind of budget you’re aiming for. Calculate that as a monthly payment and start paying it now – to yourself. Take the difference between your rent and your practice mortgage payment and drop it in savings to build up some cash for a down payment. Speaking of…

Save for a down payment. You’re going to have to bring a lot of cash to the closing table when you buy a home. (Although by no means do you have to bring 20% – your down payment can be as little as 3%.) Start saving it now. And with interest rates rising all over the place, the best place to save is a high-yield savings account, where it might grow a bit between now and when you’re ready to buy. 

To buy a house, you’ll need every penny you can get. Make sure to have them handy.