The Housing Shortage

The Housing Shortage Facing The Midwest

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers the housing shortage facing the Midwest. The housing shortage in the Midwest has impacted and affected homebuyers in the Midwest. While home sellers enjoyed the multiple offers on their listed homes, many homebuyers were affected by multiple offers on the same property.

There is not a homebuyer who did not have been in a bidding war on a property. Most homebuyers needed to bid over the list price to get the winning bid. Paying 10% or more over the list price was becoming the norm.

The housing market has been facing a housing shortage nationally since 2012. However, despite the historic skyrocketing mortgage rates, home prices increased with no signs of correction.  The demand for homes for homebuyers far surpassed the high rates and soaring inflation. The housing shortage is forecast to continue as more renters plan on becoming homeowners. The demand for housing is expected to outpace the inventory of homes.  The following paragraphs will cover the Midwest states’ housing shortage.

Introduction to the Midwest Housing Shortage Crisis

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The Midwest has long been considered the heartland of America, a region known for its friendly Midwestern values and a strong sense of community. However, in recent years the Midwest has been facing a housing crisis that is quickly making it one of the most expensive regions in the country to live in.

The problem began during the housing boom of the early 2000s when prices for single-family homes in the Midwest started to rise at an unprecedented rate. The rise was partly due to investors from coastal regions buying up properties in the Midwest as second homes or investment properties, driving up prices even further.

At the same time, many young people were moving to the Midwest for jobs in the burgeoning tech and startup industries. With more people competing for fewer homes, prices skyrocketed, leaving many middle-class families out of the market. With more people competing for homes, the situation worsened because new construction needed to catch up with demand, resulting in a severe shortage of affordable housing options.

How The Volatile Housing Markets Created Accelerated The Housing Shortage

After the Federal Reserve Board lowered interest rates to zero percent in 2019, mortgage rates have tanked to historic record lows. 30-year fixed-rate mortgages have dropped to 2.5% in early 2021, and the 15-year fixed-mortgage rate dropped below 2.0% for prime credit borrowers.

Renters who were not planning on buying a home until years later decided to pull the trigger on a home purchase and take advantage of historically low rates. Unfortunately, homebuyers were facing a dilemma. The minute a home was listed, dozens of buyers were interested in placing a bid on the home.

Home sellers were selling their homes significantly higher than the list price. Even though homes were not appraising at prices over list prices, homebuyers were getting the money to purchase the home. Lenders will only base the home’s market value on the appraised value of the home and not the purchase price. Therefore, for any amount buyers pay over the appraised value, the buyer must come up with cash out of pocket. Today, mortgage rates have soared to over 7.0%. Despite record-high rates and soaring inflation, demand for homes remain high due to the housing shortage. The housing shortage in Midwest states is reaching a crisis level.

How The Housing Shortage Is Affecting Homebuyers

HUD and the Federal Housing Finance Agency have increased FHA and Conventional loan limits for the past seven years due to the skyrocketing home prices. The housing shortage was becoming a crisis throughout the country. Pre-approved homebuyers were seeing home prices skyrocket before their eyes.

Some homebuyers were frightened the way home prices were skyrocketing that, they were going to get priced out of the housing market. Undoubtedly, it was a seller’s market and will continue to be a seller’s market for months and years.

This has driven home prices to record high levels pricing many homebuyers gave up and got out of the housing market. Countless pre-approved homebuyers at Gustan Cho Associates had to wait over a year to get a winning bid on a house during the housing shortage of 2020 and 2021. Many homebuyers got priced out of the housing market due to high rates and soaring home prices.

How The Housing Boom Affected Homebuyers Get Seller Concessions

Most homebuyers depend on seller concessions to pay their home’s closing costs. The team at Gustan Cho Associates are experts in helping homebuyers during the housing shortage. John Strange, a senior loan officer at Gustan Cho Associates, explains how the team at Gustan Cho Associates are experts in helping homebuyers get seller concessions to cover closing costs as follows:

We can help negotiate with the sellers or the seller’s real estate agent on getting the homebuyer a seller concession so they can cover their closing costs. If the homebuyer is short to cover closing costs due to insufficient seller concessions, the lender can offer a lender credit.

Lender credit only applies to borrowers with higher credit scores. A lender credit works because the lender will charge a higher mortgage rate instead of giving the borrower a cash credit to cover the closing costs. However, a maximum cap is on how much a lender can charge on residential government or conventional loans.

Housing Market Forecast For 2023

Home prices are forecasted to keep increasing, making it harder for homebuyers to purchase a home in the Midwest.  Borrowers with lower credit scores can only be charged a certain rate, so lender credit may not be available. We realize this can get confusing, so contact us if you need further explanations on this topic or other mortgage/real estate-related topics at

Nobody has a crystal ball, and the housing correction went the other way. Housing prices increased like never before. Home prices are expected to keep increasing for the next several years from all the data and outside factors with low-interest rates and the economy.

We can go over this concept over the phone in great detail so there are no misunderstandings. In this article, we will discuss and cover the housing shortage facing homebuyers shopping for a new home. We will also cover how long the housing shortage will last and how it will affect home prices.

Coronavirus Outbreak Created Demand For Homes Furthering The Housing Shortage

The coronavirus outbreak in February 2020 has changed many companies’ business models. Most companies in the United States have changed their business models to change a significant percentage of their workforces to remote positions.

Remote workers can now live anywhere in the nation. They no longer have to be close to their workplace. A large percentage of America’s workforce is not remote workers.

Many remote workers who used to live in states with high home prices, such as California and New York, can now relocate to lower-taxed states with affordable housing, such as Tennessee, Indiana, Georgia, Florida, Texas, Alabama, Ohio, Missouri, North Carolina, South Carolina, Michigan, and other states. Substantial renters and millennials have flooded the home-buying market, fueling the housing shortage’s fire.

Mortgage Programs Outside of Government and Conventional Loans

Having alternative mortgage loan programs for homebuyers who could not qualify for traditional mortgages has spiked the housing demand and added more homebuyers in a short housing shortage market. The housing shortage is not as bad as it was in early 2021.

Since demand outpaces the inventory of homes, prices continue to increase. Bidding wars are expected to become the new norm. It is perfectly okay for home prices to keep increasing as long as it increases steadily.

Skyrocketing home prices like the double-digit returns we have seen the past few years can be dangerous. If home prices suddenly skyrocket, then there can be a correction. With many city dwellers exiting city life as renters, shopping for single-family homes in the suburbs, and the mass conversion of remote workers in the workplace, home prices are expected to increase more than previously. Many factors have caused the sudden double-digit increase in home prices in the past few years.

What Factors Are Causing The Housing Shortage

Multiple Mortgage Programs Outside Government And Conventional LoansThe housing shortage the United States has been experiencing for the past several years is due to multiple factors. It started with the 2008 Great Recession and the housing meltdown. When the nation was going through the housing meltdown, foreclosure homes were getting purchased by individual and private equity investors in bulk. Home construction came to a halt.

Over 200,000 homes were purchased by investors and used as short-term rentals. Home construction came to an abrupt halt until 2012. This is a lag of almost four years where homes were not being built. The home construction industry was idle. There was a lot of catching up with building new homes and catch up with the downtime when home construction sat idle.

Other factors escalated the demand for homes besides the shortfall of new homes from 2008 until 2012. The Federal Reserve Board reducing interest rates to zero percent and the coronavirus outbreak in February 2020 were major factors that increased demand for homes. Some homebuyers put their plans on buying a home on hold after the coronavirus outbreak hoping there may be a housing correction.

The Midwest’s Surprising Lack of Affordable Housing Options

Were you looking for affordable housing in the Midwest? You might be surprised that it’s more challenging than you think. Despite being known for its affordability and quality of life, the Midwest faces a housing crisis that has left many struggling to find suitable living arrangements.

The Midwest’s lack of affordable housing opti ons is a serious problem that has been largely overlooked. With the rapid rise in home prices, many people cannot find homes within their budget, which can have lasting effects on families and communities.

It is important for state governments to take action and create more affordable housing options so that everyone has access to safe and comfortable living conditions. This blog post explores why the Midwest’s lack of affordable housing options is becoming increasingly problematic and how to overcome the obstacle. Read on to learn more!

Housing Prices in The Midwest

Today, the average price of a home in the Midwest is nearly double what it was just a decade ago, and rents have increased by nearly 60%. This has strained families struggling to make ends meet and has forced many into homelessness or onto waiting lists for government-subsidized housing.

Several factors have contributed to the Midwest housing crisis. One is the loss of manufacturing jobs in the region, which has led to decreased wages and increased poverty.

Another factor is the increasing cost of housing, which has made it difficult for people on fixed incomes or low incomes to keep up with rent or mortgage payments. There is no easy solution to this crisis, but it is clear that something needs to be done to address the need for more affordable housing options in the Midwest. The Midwest housing crisis is a problem that has been escalating for years.

Population Growth Is Adding Demand For Homes Despite The Housing Shortage

Gustan Cho Associates has added dozens of new non-QM and alternative mortgage loan products, such as non-QM loans one day out of bankruptcy or foreclosure, which added more renters who could not qualify for traditional mortgages able to qualify.

Due to being a seller’s market with multiple offers on a home, many sellers were not offering any seller concessions on a home purchase. Not getting a seller concession by the seller is a major negative on the homebuyer.

The region has seen a decrease in the availability of affordable housing and an increase in the number of people who are homeless or at risk of becoming homeless. The problem is exacerbated by the fact that many of the region’s cities are experiencing population declines, which means fewer potential renters or buyers for the existing housing stock.

The Housing Shortage in the Midwest of Affordable Homes

The problem is also compounded by the fact that there is a limited supply of affordable housing options in many Midwest cities. The consequences of the Midwest housing crisis are far-reaching. They include increased homelessness, evictions, and foreclosures; strains on social service providers; and negative impacts on mental health and overall well-being.

There are several ways to address the Midwest housing crisis, but it will require commitment from all government and private sector involvement. Some possible solutions include investing in affordable housing initiatives.

The housing shortage crisis also disproportionately affects people of color and other marginalized groups, who often have fewer resources and safety nets to fall back on when they experience housing insecurity or homelessness.

Causes of the Housing Shortage in the Midwest

There are many causes for the housing shortage in the Midwest. One is that the region has experienced significant population growth in recent years, while the number of homes available has not kept pace. This is especially acute in cities like Chicago and Minneapolis, which have seen a boom in young professionals seeking jobs in the growing economy. Another factor is that many available homes are too expensive for most people.

The median home price in the Midwest is over $200,000, while the median income is only around $50,000. This means that even if people could find a place to live, they would be spending a huge chunk of their income on housing costs.

There is a need for more affordable rental options in the Midwest. According to a recent report, nearly half of all renters in the region are considered “cost-burdened,” meaning they spend more than 30% of their income on rent. This leaves little room for other expenses and can make saving up for a down payment on a home difficult. The housing shortage in the Midwest is having a ripple effect throughout the economy.

How The Economy in the Midwest Affects The Labor Market

Businesses are struggling to find workers as help; they need help to afford to live near their job sites. Families are forced to move further away from urban areas in search of more affordable housing options. And low-income renters are being pushed out of neighborhoods as gentrification drives up rents. Who is most affected by the shortage?

In the Midwest, the lack of affordable housing options affects people of all income levels. The most affected are those with low-income or fixed incomes, such as seniors on Social Security or people with disabilities. People who are employed but don’t make much money struggle to find affordable housing.

A recent study found that nearly half of all renters in the Midwest spend more than 30% of their income on rent, which is considered unaffordable. Again the shortage of affordable housing is also impacting families and children. Many communities need to be safe and affordable places for families to live. This can lead to homelessness or families having to move frequently, disrupting children’s education and stability.

Factors Affecting Affordable Housing Options in Midwest States

Many factors contribute to the Midwest’s lack of affordable housing options, but one of the most significant is the region’s rapidly growing population. According to the latest Census data, the Midwest’s population grew by nearly 5% between 2010 and 2018, while the number of housing units in the region increased by just 3%. This imbalance has led to a tight housing market and rising prices, disproportionately affecting low- and middle-income families.

A recent study found that nearly half of all renters in the Midwest are considered “cost-burdened,.” This leaves little room for other essentials like food, transportation, and healthcare. For those already struggling to make ends meet, the shortage of affordable housing options can be devastating.

If you or someone you know is struggling to find affordable housing in the Midwest, some resources are available to help. Your local Housing Authority or community development office is a good place to start. They can provide information about available programs and assistance—strategies for improving affordable housing options in the Midwest.

How To Improve Conditions For Affordable Housing in Midwest States

Many strategies can be implemented to improve affordable housing options in the Midwest. One strategy is to increase funding for affordable housing initiatives at the local, state, and federal levels. Another strategy is incentivizing developers to build more affordable housing units.

Zoning laws and regulations can be reformed to allow for more density and mixed-use developments, which can help increase the affordable housing supply. One way to increase funding for affordable housing initiatives is through public-private partnerships.

Chicago has partnered with many private companies and philanthropic organizations to create the Chicago Community Catalyst Fund, which will provide $100 million in financing for affordable housing developments. Private companies can also be incentivized to invest in affordable housing through tax breaks or other financial incentives. Zoning laws and regulations are often a barrier to increasing the supply of affordable housing.

Less Zoning Regulations To Make Cost To Build Affordable

In many cases, these laws limit the density that can be built in an area, which drives up the cost of land and construction. Reforming these laws could help make building more affordable housing units easier and more cost-effective.

Changing zoning regulations to allow for more mixed-use developments could also help increase the supply of affordable housing and provide residents with access to essential amenities and services.

There is no one-size-fits-all solution to the affordable housing crisis in the Midwest. But there are several strategies that communities and policy-makers can pursue to address the problem. One way to increase the supply of affordable housing is to make it easier for developers to build more units. This can be done by streamlining the permitting process, incentivizing developers who create affordable units, and reforming zoning laws for more density.

Preserving Existing Subsidizing Housing Units

Another approach is to create or preserve existing subsidized housing units. This can be done through public-private partnerships, using public funds to buy and rehabilitate properties, or creating community land trusts. In addition, policies can be put in place to help low-income families afford rent.

The Housing Choice Voucher program helps families with limited incomes cover a portion of their rent payments. Other options include increasing funding for affordable housing programs or providing tax breaks for renters.

Regardless of the strategy, involving all stakeholders in decision-making will be important – from residents and community groups to developers and government officials. Only by working together will we find lasting solutions to the affordable housing crisis in the Midwest.

Creative Solutions To The Housing Shortage Crisis in Midwest States

What are some creative solutions to the housing shortage problem? The Midwest has a surprising lack of affordable housing options. This is due to several factors, including the region’s declining population, the high cost of living in rural areas, and the lack of investment in affordable housing initiatives.

There are many creative solutions to this problem. Creating incentives for developers to build more affordable housing will stimulate housing starts and more homes. This can be done by providing tax breaks or other financial incentives as well as lax zoning laws and relaxing environmental regulations.

Another solution is creating community land trusts to help decrease housing costs. Another solution is to encourage the development of micro-housing units that are smaller than traditional apartments and can be more affordable.

Is Buying Real Estate in the Midwest a Good Investment?

There is no one-size-fits-all solution to the affordable housing crisis in the Midwest, but some creative solutions have been effective in other regions. One solution is to create incentives for developers to build more affordable housing.

Midwest cities can solve the housing shortage by encouraging home developers with incentives. This can easily get resolved by offering tax breaks, zoning changes, or other financial incentives.

Another creative solution to spark housing growth is increasing funding for affordable housing programs. This can be done at the local, state, or federal level. It is important to promote policies that encourage mixed-income housing developments.  This ensures that low- and middle-income families can access quality housing options.

Is Buying Real Estate During The Housing Shortage a Good Investment

Investing in affordable housing will help individuals and benefit entire cities by creating jobs, boosting local economies, and providing stability to communities. If you should decide to buy, before you begin looking for a home and during the process, we have vast experience working with buyers to get them ready to purchase their dream home.

Ronda Butts, a dually licensed realtor and licensed loan officer at Gustan Cho Associates, and her team can take you through your home loan’s entire buying and financing process. Ronda or one of her experienced associates can also can connect you to title companies, home inspectors, general contractors, handymen, landscapers, loan officers, financial advisors, accountants, attorneys and real estate agents in your area that can help as needed.

Call or text us at 800-900-8569 or email at for more information and further assistance. Ronda is an experienced referral agent, a dually licensed real estate agent, and a mortgage originator. She has successfully guided many homeowners through obtaining a home on both the lending and real estate side. She does not represent buyers or sellers but offers free consultation in 48 states at Gustan Cho by connecting homeowners, buyers, and sellers to the needed sources.

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