Miller: Covid-driven Housing Inventory Shortage Persists, Perpetuating Affordability Problem

The hard-to-fix problem of one-time excessively low mortgage rates will echo for years says President and CEO of Miller Samuel real estate and appraisal consutlting firm

Jonathan Miller is the President of Miller Samuel Inc a real estate appraisal and consulting firm based in New York city that he founded in 1986 back when former Fed chair Paul Volcker had crushed the back of sky high inflation with sky high interest rates.

Fast forward to 2026 . Jonathan is now nationally known and respected for his work where he covers as much as $5 billion of property annually in the New York City metropolitan area.

So what does he see now for the housing market as the latest existing home sales data show a more than 8% drop in January and as housing affordability remains one of the hottest political hot potatoes around?

As for the latest data, ”I think the general take is that, sales activity has incrementally increased, because mortgage rates since July of last year have, fallen…sort of gradually, about 60 basis points, which has incrementally pulled people into the market,” Jonathan says.

Where does the housing market go next? Jonathan starts with two major points.

First, ”There is no national housing market, really. It’s an aggregation of thousands of markets,” he says, with its own regionally unique and changing forces driving it.
Second, there one factor right now that all of the regional markets have in common driving them and that is a lack of housing inventory.

“When we look at the housing market right now, the most important metric in housing is inventory…. That is defining because, you know, 20 years ago, if I told you that mortgage rates doubled, in a few years, and housing prices continue to rise, it wouldn’t make sense. And essentially what we had is, and we’re still living in the distortion of inventory.”

As for what has caused this lack of inventory and driven up home prices? Hear why Jonathan blames the historically low mortgage rates during the pandemic for spurring insatiable demand for housing, leading to a depletion of inventory across the country that persists to this day.

And what he sees as as a way out of the houing predicament. Spoiler alert: he sees “3000 answers” and no great solutions yet.

There is no national housing market/and regional situations 00:01:46:14

There is no national housing market, really. It’s an aggregation of thousands of markets. And what’s fascinating to me is every month, you know, we have, research that comes out from, you know, S&P Case-Shiller and NAR and, you know, and it’s always sort of from the national context, when we look at the housing market right now, the most important metric in housing is, inventory that is defining because, you know, 20 years ago, if I told you that mortgage rates doubled, in a few years and housing prices continue to rise, it wouldn’t make sense. And essentially what we had is, and we’re still living in the distortion of inventory. So, for example, if we look at the Northeastern United States in the Midwest just to be sort of regionally general, inventory is extremely tight. And so markets, for example, around New York City, at about one out of every two, home sales sell at a bidding war, meaning above, the last asking price.

Inventory is key 00:03:11:05

If we look at the Sunbelt states like Texas and Florida, where there was a tremendous amount of migration, outbound from the northeast and from, the West Coast to those locations, they were just simply better at creating more supply building quickly. And now they have, excess inventory. Not, you know, bloated or, you know, massive amount, but but it is nothing like what we’ve seen in the northeast in the Midwest and, and the western region of the US is sort of in between.

Housing shows snails’-pace progress 00:03:43:08

So when you ask how the housing market is doing, I think the general take is that, sales activity has incrementally increased, because mortgage rates since July of last year have, fallen, you know, sort of gradually, about 60 basis points, which has incrementally pulled people into the market. And, and so, I’ll eventually answer your question, but the idea but the idea is that, it’s very regionally different, significantly different.

Activity will continue to pick up at ‘modest pace’ 00:04:26:12

The general theme is that activity is actually picking up again, you know better than me the forecasts for, you know, a Fed cut, which may or may not lead to lower mortgage rates is only one in the forecast for this year. So I don’t think there’s going to be a tremendous amount of decline in mortgage rates, this year, which means that transactions or housing transactions are going, possibly improve at a very modest rate only because mortgage rates aren’t going to plummet.

GSEs provide a more uniform national mortgage rate situation 00:05:09:03 - Mortgage rates really. You know, that’s what the GSE is. Fannie and Freddie are really for, you know, to create, you know, or one of the by-products is can, you know, so that a mortgage in California is not dramatically different from, say, New York. Otherwise, we’d have, you know, very inconsistent mortgage picture. The challenge right now is that with, financing, is that where we’re actually seeing it across the United States is, we’re seeing this sort of spread, where, and I’ll be very general, but, you know, if you sort of say the upper half of the housing market, versus the lower half, the upper half is growing because of the, financial markets d.

Bifurcated performance 00:06:08:18

Well, some could even say it’s in bubble territory. You know, depending on your point of view. But equity drawdowns and the wealth effect and all that are helping, you know, the higher end of the market; the lower end of the market has, has been the laggard, in performance compared to the upper half. But that has a picture has improved. Quite a bit because mortgage rates have drifted lower. And the lower we go in price the more dependent you are on financing.

History means different things to different people 00:07:43:17

Yeah we were like at 18.5%. Something along that line in my first house, I it had dropped from 13% to like 8.5%, or 8.25%. And I thought it was free money at, at eight and a quarter compared to, you know, what it was before. The average 30 year fixed going back 50 years, the average rate is about 7.5%. So, you know, but the problem is the context is you could get a 30 year for 2.75%, back, during the pandemic, the dark days of pandemic. And that actually is why prices are so high now. during the pandemic, because short-term rates were on the floor, mortgage rates were, you know, below 3%, it created this. And you had you had people sitting in their homes for 14 months, sort of cooped up and scheming and planning to buy a bigger house or a different house or, you know, something in the suburbs or you know, with land or whatever.

The pandemic ‘s effect echoes 00:09:38:11

And, and so you have this insatiable demand that, not to sound too dramatic, but it essentially eviscerated housing supply, across the United States. And the problem with that is that you have to think of inventory as this living, breathing, object that takes time to grow. And it’s based on the lifestyles of the occupants of the house, like, you know, during the pandemic, we became empty nesters.

But inventory problems have been ‘national’ 00:10:07:23

All my children were gainfully employed and we wanted to downsize. Right. So that’s a motive to move. If I got a job in a new market, I’d move and sell my house. Right? There’s all kinds of reasons, but inventory. For the last five years has been, you know, generally, you know, if you, you know, go against what I said about the national housing market, just in general, inventory has been less available.

Existing homes are the problem 00:10:37:03

And so because inventory takes time to grow and expand, we can’t build our way out of this problem. If you think about inventory with two definitions, about 90% of it is existing or resale inventory and 10% of it is new construction. So even if you tripled new, you know, housing, creation, you’re still 90%, you know, that’s a big number that’s sort of stuck and that’s, that’s the actual affordability challenge that housing is facing right now.

Ideas, but no real solutions 00:11:33:20

Right. So, that is a question that has a probably 3000 answers to it because no one has a great solution yet. There’s been lots of ideas thrown out. There’s been things like 50-year mortgages to reduce the payment, which will simply make housing prices higher. We’ll do just what we did during the pandemic, where if you lower the payment, you’re the seller is going to know that the buyer can afford to pay a higher price. So it is it is not a solution. And there’s other issues with it, like, you know, you don’t really pay off your mortgage if you’re 20 and you get a 50 year mortgage, you’re paying off your mortgage in your in your mid-70s, it’s kind of late, you know, you’re, you’re well past retirement.

Fixed Vs variable rates and the lock-in effect 00:12:47:15

And I think the, the dominant the dominant mortgage, type in like the, the EU and, and around the world is a variable rate adjustable rate mortgage. So your payments ebb and flow with what, you know, whatever the, the barometer is, whereas we’re like, one of the only developed, nations in the world that does the fixed, you know, everything is the goal is to get that fixed rate and that actually created a big problem during the pandemic because, we had something called the lock in effect, where, you know, if I, if I had a 2.75 mortgage and at the time coming out of the pandemic, the prevailing rate was as high as 7% or even now at in the low sixes. That’s a huge, loss in how much you get for your money when you’re, you’re, you know, say you’re making a lateral move to a different neighborhood, in the same town or to a different community because of a job move or whatever. The reason is, you get a lot less house for your money. With a much, you know, a rate that’s more than double. So what that’s done is prevented people from, listing their home. You know, homeowners are reluctant because then they become buyers. And, yeah, all of a sudden. So in sort of a strange way, there’s probably a word for it, but the fact that someone has a below market rate, mortgage rate, it’s almost like an asset that they’re holding. They think of it as, as something that’s very tangible that, they’re lucky, you know, they’re different, than everybody else. And, and that’s been part of the problem of, of bringing more inventory out the market.

The house Vs the land it sits on 00:15:00:24

Yes. So the first thing just to go down, I won’t go down the rabbit hole too far. But when you think of land, the rule of thumb actually wrote a Bloomberg opinion column on this, like ten years ago, where, land appreciates and housing depreciates, like the improvements on the land depreciate. So when you look at, you know, the, you know, a market, you know, typical suburban market, from the beginning of the pandemic to today has gone up like the value has gone up 50%. It’s not the house, it’s the land that it sits on. And, depending on the market, land, if it’s in very short supply, then land prices stay elevated. If you’re in areas like Arizona, you know, Phoenix, cities like Phoenix, where there’s sort of no natural boundary and you can expand, expand land prices are inexpensive and it’s more economical to build than, say, in a high density market like Manhattan.

Institutional buyers are not the problem...banning them hardly a solution 00:16:36:12

Right, right. Yeah. Institutional buyers to prevent them from buying single family houses and, and, coming out of the foreclosure crisis after the great financial crisis circa 20 1112, the tremendous foreclosure activity in Wall Street came in, institutions came in and bought a lot of distressed real real estate and sold it off. If you look at the market share of institutional buyers today in terms of what they own and are purchasing, what they’re purchasing, they’re only represent about 1% of demand. So they’re there. So if they are banned from purchasing, I don’t think it’ll have maybe there’s other benefits, but in terms of providing more supply because they’ll be less competition for inventory, I don’t I don’t really see it, as something that will be helpful to consumers. One thing I wanted to bring up was, to the same general idea that you’re bringing up here is that when you think about institutional buyers of houses, just like what you just said about, sort of tech centers, is that there are clusters. So, there’s a tremendous amount of institutional concentration in the Sunbelt states and in the Midwest. That seems to be, where where the heaviest concentration is. And you have two very different markets. You have the Sunbelt, ironically, has plenty of inventory. So institutional buyers are not a factor at all. But in the Midwest, maybe a little bit more of a factor because inventory is so tight. So again, like you’re saying, it’s this sort of localized, every market is different.

The basic consumer decision is micro not macro 00:21:21:24

The real estate industry used to be the gatekeepers of information. Now it’s, you know, there’s almost too much, right? You know, like, how do you tell the story? And so, the, the thing and we sort of touched on it is I basically say you can large you should largely ignore, ignore the macro and focus on the micro and, and it’s the way to think of it is, if you’re looking to buy a home or to sell a home, and you have a trusted friend or real estate agent, you know, think of it in the context of sitting down at, like, a coffee shop and talking about the market, you know, without, you know, rapid fire, you know, statistics just in, in the local market that they’re looking at. Okay. There’s nothing beyond that in my mind. To the typical consumer, it’s just focus on the micro.

America is not China 00:23:33:12

About ten years ago, I was in Shanghai, with my wife, actually, Beijing and then Shanghai, and we took a high speed rail in, from Beijing and to to Shanghai and literally the whole I don’t remember how long it was 5 or 6 hours. There was, there were, like towers, residential towers under construction the whole way on both sides of the train. It was it was incredible. Like the volume of construction. And there’s a stat that, that I read somewhere that, the amount of concrete used in China, in the last three years is more than in the U.S over the last hundred years. Yeah. And, and, you know, there’s been so much right. And, and so we’re woefully behind, I think, in building more housing, but it’s just not that simple because of the things we’ve talked about, the high price of land.

US has no high-speed rail solution 00:24:41:04

Yeah. So your solution is to go out further and have a faster commute, which I love. The idea. My, you know, the part I can’t get past is, you know, that comes from either federal, state and local governments and, and, you know, it’s a massive investment. And we have just for some reason, being as a country, been incredibly slow at high-speed rail. If you look at, you know, the the amount of tracks, the mileage of tracks and or kilometers of tracks in Europe, it just dwarfs what we have. But, you know, I actually thought there would be a bigger solution, which is along the same line that you’re talking about with, with, remote work, you know, that, because we saw that coming out of the pandemic, tremendous amount of remote work and, and what was the initial search? It was for cheaper housing. Right. So we had tremendous outbound migration from the northeast, from California to the most expensive housing regions in the country. And that’s ended. Right? You know that. And and the markets that they moved to California, moving to Texas and the northeast, moving to Florida, those housing market have exploded in in price become I, I’d like to call Florida like it’s been ‘New York-ified,’ you know.

Policy uncertainty 00:26:41:21 -

So my guess you know, and always you know, when I think about what the fed will do, it’s a wild guess. But, but I think of it as it’ll just be a quarter basis, a quarter, you know, 25 basis points. It’ll be a modest decline. I mean, one of the challenges the fed has, I think, is sort of balancing, you know, things that are happening in the employment picture with, things like tariffs and, you know, things that have sort of, you know, an indirect or direct impact on sort of providing inflationary pressures to keep the fed from cutting more.

Uncertainty leads people to mark time 00:27:48:09

The consumer and this is the problem is that we’re at peak uncertainty. We have been for most of the last year or year and a half. And, and so what do consumers do when they’re uncertain? They pause. And so what we’re what we’re seeing, it’s not just, you know, we’re so rate mortgage rate centric when we talk about housing, which is real, a real concern. Yeah. But but it’s also sort of the uncertainty of, you know, there’s a lot of plate spinning in the air in the economy. And consumers, especially if they have a lower rate, are just sort of sitting still. And and so we have a lackluster transaction volume across the US.

Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state, and federal courts. He holds the Counselors of Real Estate (CRE). He is an Appraiser “A” Member of the Real Estate Board of New York and the former two-term President of RAC, a premier appraisal organization whose members focus on complex residential properties for relocation, litigation support, testimony, and reviews.

Miller Samuel provides appraisal services on roughly $5 billion worth of property per year in the New York City metropolitan area.

Mr. Miller is the author of a series of market reports considered the “report of record” covering the New York City metropolitan area, Florida, and Southern California that are relied on by the media, financial institutions, and government agencies, including the Federal Reserve, Internal Revenue Service, U.S. Department of Housing and Urban Development, the NYC Office of Management and Budget and others. He co-authored a research paper for NYU School of Law, and the NYU Wagner Graduate School of Public Service’s Furman Center for Real Estate and Urban Policy titled The Condominium v. Cooperative Puzzle: An Empirical Analysis of Housing in New York City, published in 2007 by the Journal of Legal Studies at the University of Chicago. He developed pending home sale indices for the Washington, D.C., and Baltimore metro areas in addition to Central Pennsylvania on behalf of Bright MLS, one of the largest multiple listing systems in the U.S.

Mr. Miller serves on the New York City Mayor’s Economic Advisory Panel representing the residential real estate sector and the New York State Budget Division Economic Advisory Board. He has participated in studies on valuation issues with academic institutions including New York University, Princeton University, Columbia University, and Baruch College. He co-authored a research paper as part of an Urban Land Institue Advisory Services Resilience Panel in Norfolk, VA.

Jonathan is an Adjunct Associate Professor of Architecture, Planning and Preservation in the Master of Science in Real Estate Development (MSRED) Program at Columbia University teaching market analysis. Mr. Miller has also guest lectured at Columbia, and at other institutions including Harvard University, NYU/Schack Institute Wharton/University of Pennsylvania, Drexel University, Baruch College, and Touro College.. He is a New York State Real Estate Instructor for qualifying and continuing education courses and a New York State Real Estate Appraiser Instructor for qualifying certified general and continuing education courses.

Jonathan is a well-regarded real estate commentator, covering U.S. and regional housing issues in print and digital media, including The New York Times, Bloomberg, The Wall Street Journal, Reuters, AP, CNBC, CNN, ABC, The Real Deal, Crain’s New York Business and others. From 2009-2012 he interviewed a wide variety of housing and economic experts for his podcast The Housing Helix with Jonathan Miller. Since March 2015, he has been the author of Housing Notes, a newsletter that provides unique insights into the real estate vertical. This effort largely replaced his award-winning Matrix Blog. Mr. Miller provided a monthly chart for his Economic Spotlight series for Crain’s New York from 2003-2009. He provided Manhattan housing data by zip code for the New York Times website from 2003-2017. Mr. Miller has provided market data to The Real Deal’s Market Data Book since 2007; to Crain’s New York Business Market Facts since 2005; to the Downtown Alliance since 2012. His firm powers three Manhattan Luxury Sales Price Indices and three Manhattan Luxury Rental Price Indices for Bloomberg Markets. He was a columnist for Bloomberg Opinion from 2014 to 2015 and wrote his Three Cents Worth column for various sites across the Curbed Network, the neighborhood, and real estate site blog from 2004 to 2016.

Some distinctions awarded to Mr. Miller include:
• Recognized as the “Most respected man in New York City real estate” by Fortune Magazine
• Referred to as a “Real Estate Visionary” by James Lane Post
• Recognized as one of the “Power Players in Residential Real Estate” by PoliticsNY
• Referred to as “The Most Honest Man In Real Estate” by Business Insider
• Recognized as “Notable in Real Estate” by Crain’s New York Business
• Referred to as “Appraiser Extraordinaire” by Forbes
• Named “Best Online Real Estate Expert” by Money Magazine
• Declared the “Most Trusted Man in NYC real estate” by The Observer
• Named one of “The Best Finance People on X/Twitter” by Business Insider
• Selected as one of the 100 Most Powerful People in Real Estate 3 times by The New York Observer.
• Recognized for “Keeping the Industry Honest” by The New York Post.
• Named one of the 20 Biggest Power Players in NYC Real Estate by The New York Post.
• Recognized by Inman News as one of the top 25 most influential U.S. real estate bloggers, and his blog, Matrix, was voted one of the top-five U.S. real estate blogs.
• His Matrix blog was named a top-five real estate industry b2b site in the Swanepoel Trends Report.