This Surprising Reason Is Why Housing Prices Are so High, According to Ramit Sethi

It's not only a matter of low inventory and high buyer demand.

If you've attempted to buy a home over the past year or so, your efforts may have been futile. Home prices have been sky-high on a national level. And this year, mortgage rates skyrocketed as well. That's created a massive affordability crisis for buyers and has forced a lot of them out of the market until things cool off.

Financial guru Ramit Sethi understands how frustrated today's buyers might be. And in a recent tweet, he pointed to limited supply as the primary reason why home prices are so elevated these days. But it's not just that sellers aren't listing their homes. Sethi insists there are other roadblocks to increasing housing supply.

Zoning issues are a problem

Any time there's not enough supply of a given commodity to meet buyer demand, its price tends to increase. And that's what's been happening in the U.S. real estate market.

But Sethi insists that the reason housing supply is so limited boils down to what he refers to as "NIMBYism -- neighbors and city council who like exclusionary zoning to prevent more housing."

If you've never heard the term NIMBY before, it stands for "not in my backyard." And NIMBYism refers to people who oppose new homes being developed in close proximity to their homes. Often, this concept comes up in the context of proposed affordable housing.

Of course, it's important to see both sides of every story. Homeowners might oppose the development of new housing units due to fears that schools will get overcrowded and roads will become jammed with traffic. These concerns often aren't unfounded.

On the other hand, there's a serious lack of affordable housing in the U.S. And it's especially difficult to find an affordable home to purchase these days.

That's problematic, because homeownership is often said to lead to more financial stability. Homeowners often have the option to tap their home equity once they've built it. And while peripheral homeownership costs like property taxes and insurance can rise in time, buyers who lock in fixed-rate mortgages can look forward to predictable housing payments for decades. Renters can't say the same.

When you rent a home, your costs could easily climb from one year to the next. And "just move when your rent goes up" isn't an easy, inexpensive, or even viable solution for a lot of people, which is why renters often get caught in a trap of paying their landlords so much money that they can't save for a down payment on a place of their own.

A tough situation

We're unlikely to see a major uptick in housing construction in the near term, especially with building costs being as high as they are today. But more so than that, zoning laws need to change if we want to see a noticeable rise in affordable housing for home buyers. And until that happens, unfortunately, homeownership may continue to be out of reach for a lot of people who would like the option to purchase a place of their own.