There’s a theory about housing that has taken hold with a kind of religious fervor: If you want to make housing more affordable, just build more of it. Supply and demand. Simple economics.
This narrative is now dominating housing policy discussion across the political spectrum. Deregulate, upzone, speed up approvals, let the market work. And if you build enough homes, the theory goes, prices will come down.
But here’s the question almost no one asks: What happens when prices actually start to fall?
Because that’s not just a hypothetical. It’s already happening in places like Phoenix, Atlanta, Miami, Dallas, and more. And the response hasn’t been to declare victory. It’s been panic. Builders are walking away. Lenders are tightening. Policymakers are rushing to backstop the system.
The theory says we should be celebrating and accelerating home production even more to get prices to levels that would actually be affordable. The reality demonstrates otherwise.
The Moment We’re In
In The Atlantic, Rogé Karma recently pointed out that housing prices are rising fastest in the very cities once seen as escapes from high-cost coasts, places like Phoenix and Dallas, long considered “easy to build in.” These Sun Belt metros were supposed to be immune to the affordability crisis. Now they are the new epicenters.
In Slate, Henry Grabar reports that even in fast-growing Forsyth County, Georgia, just outside Atlanta, local officials are freezing new development. Why? Gridlock, school overcrowding, and resident pushback. In other words: growth fatigue.
Yet, beneath the surface, fragility is spreading. Forbes reports rising mortgage delinquencies, not just in subprime loans, but among overstretched middle-class buyers. AP reveals that nearly 15% of pending home sales fell through in May, the highest cancellation rate for that month on record. And home starts dropped in May by nearly 10%, with permits falling even further. Builder sentiment is the lowest it’s been since 2012.
If “build more” was going to bring prices down and stabilize the system, we wouldn’t be seeing these mixed signals. If the core problem were simply that prices are too high due to a lack of supply, everything would be as simple as theory suggests. It’s not. That’s because the system isn’t designed to survive prices coming down.
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