Author Archives: David Reiss

Why Was Housing So Much Cheaper in the 1950s?

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inequaltiMarketplace quoted me in Why Do Cars, Housing and Clothing Cost Much More Than They Did in the 1950s? It reads, in part,

Question: Why did a pair of jeans, a box of rice, cars, houses and other items that still exist today cost one price in the 1950s but now are so much more? They’re still the same products with very little change. In fact, due to automation, many of these things are actually cheaper to produce.

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Aren’t products today higher quality?

There has been an increase in the quality of some products over time, which means looking at costs from the 1950s vs. today can seem like an apples-to-oranges comparison.

One can make the argument that cars are equipped with better features than ones from the ‘50s. “We have all kinds of things like seat belts and anti-lock brakes and computerized systems in your dashboard,” Stapleford said.

But if you’re trying to determine affordability, you have to look at the options that are available to you at the time.

“If someone wanted a 1950 car, they couldn’t get it. You couldn’t go out and buy a car that’s exactly the same as it was in the 1950s. You don’t have that kind of discretion as a consumer. You’re sort of stuck with what’s available on the market. So you’re then forced, in a way, to buy this higher-quality thing, which you may or may not want,” Stapleford said.

If you’re comparing housing prices, you also have to look at changes in the types of homes people are buying.

A typical home in the 1950s could cost around $7,000 a year vs. about $400,000 now, said David Reiss, a law professor at Cornell University who studies housing policy.

But while today’s price is 57 times more the cost of a house in the 1950s, you have to adjust for inflation and look at the size of these homes. The average house is now much bigger, Reiss pointed out. So based on square footage, a home today is actually probably four or five times more expensive than one in the 1950s, Reiss said. They also have more amenities, he pointed out.

“The quality of the housing has gone up dramatically, and that’s probably reflected in the price to some extent,” Reiss said.

But there are still other factors explaining the increase in price, which include construction productivity and supply and demand. There are people who will pay $1 million for an apartment with a leaky roof because of the area it’s in, Reiss said.

In a lot of areas with job opportunities, the regulations that govern new construction are very strict, which contributes to these high prices, Reiss said.

Many Americans feel like homeownership has become increasingly out of reach.

There was less income inequality in the mid-20th century compared to now, Reiss said. In 1950, the household median income was $2,990, with the median home value about 2.5 times that. In 2024, the median sales price was almost five times the median household income.

There is one big caveat: Reiss noted that the housing market was “incredibly discriminatory” against different groups like Black Americans. But for those who didn’t face unjust policies, homeownership was more affordable.

“Now you have extreme wealth at the one end, and some very low incomes at the bottom end,” Reiss said.

Is It a Homebuyer’s Market?

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CC BY 2.0 Mark Moz

Marketplace quoted me in Is It Really a Homebuyer’s Market Now? It reads, in part,

Housing prices are dropping and buyers are scoring steep discounts on their purchases, indicating that the real estate market is becoming more favorable for buyers. But while some homebuyers are getting better deals, housing is still out of reach for many Americans and the 30-year mortgage rate remains above 6% — double what it was in 2021.

The typical homebuyer got a discount of 3.8% or $15,196 in 2025, with 62% of all homebuyers paying less than the list price, according to a new Redfin study.

“Some sellers haven’t adjusted to the fact that demand is much slower than it was during the pandemic homebuying frenzy. They watched their neighbor’s home sell for tens of thousands of dollars over the asking price back then, and are now pricing their homes based on that,” stated the authors of the study.

And for the first time in two years, national home prices have gone negative, declining 1.4% in the last quarter of 2025, according to Parcl Labs, a housing data and analytics firm.

“I think big picture, any decline or slowing of growth is better for buyers than the type of growth that we have been seeing for a few years,” said Nicholas Kacher, an associate professor of economics at Scripps College in California.

But although there are positive signals out there for homebuyers, there are also some “countervailing points” that indicate the market isn’t entirely in their favor, said David Reiss, a law professor at Cornell University who studies housing policy.

Signs that buyers may still struggle on the market

Home sales are at a 30-year-low, which means sellers are either keeping houses off the market or buyers are not willing to purchase them, Reiss said.

“The market is not super liquid right now,” Reiss said.

Plus, nearly a quarter of homes still sold above list price last year, Reiss pointed out.

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The solution: Increase supply

The major issue with the housing market is that the U.S. is simply not building enough housing, Reiss said.

“It’s tough to build housing, and a lot of markets, lots of localities, discourage it. They don’t want new housing. They don’t want the construction. They don’t want to pay for the social services that are attached to it, like new schools and new medical facilities,” Reiss said.

 

Integrating AI Tools Into Law School Teaching

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Robert MacKenzie and I have an article in Bloomberg Law, Law Schools Should Teach How to Integrate AI Tools Into Practice. It reads,

Now that artificial intelligence tools for lawyers are widely available, we decided to integrate them for a semester in our Entrepreneurship Clinic. We have some important takeaways for legal education in general and the transactional practice of law in particular.

First, employers and educators need to account for law students who already are using AI tools in their legal work and guide new lawyers about how to use such tools appropriately.

Second, different AI products lead to wildly different results. Just demonstrating this to law students is very valuable, as it dispels the notion that AI responses can replace their independent judgment.

Third, AI’s greatest value may be in refining legal judgment for lawyers in ways that can help new and experienced lawyers alike.

Legal AI Prep

As we were planning our syllabus over the summer, we provided formal training in AI tools designed for lawyers. A librarian provided us an overview of products from Bloomberg Law, Lexis, and Westlaw early in the semester.

Before the training, we asked students how they were using AI in the legal work. Their responses ranged from “not at all” to “I start all of my case law research on ChatGPT.”

We were confident that our students would be better off operating somewhere between those extremes. Over the semester, we demonstrated how AI could enhance the speed and quality of legal work, as well as the dangers of outsourcing research and judgment to an AI tool.

AI Tool Differences

Perhaps the training’s most valuable takeaway was that each tool had access to different databases of materials and had different constraints. We designed simulations that required groups of students to complete the same transactional tasks (drafting, researching, benchmarking market terms, and crafting effective client emails) using various AI tools.

In one exercise, students acted as counsel to a small business owner. The “client” emailed them asking about standard-form contracts relevant to their industry and what pricing mechanics such contracts use.

For the research stage of the task, all teams located a standard-form construction contract, but only half of them found the industry-accepted standard form that we contemplated. The others located this form later by modifying their search approach. This helped to demonstrate some limitations of AI tools.

For the client communication stage, some teams failed to answer the “client’s” questions. This isn’t something the AI tool could address on its own, and it reminded students to constantly refocus on the big picture in addition to individual tasks.

We found that AI tools built on widely available AI platforms such as ChatGPT produced the most responsive outputs and were most forgiving of haphazard prompting. But certain specialized legal AI tools often failed to answer the prompt.

This is a double-edged sword. Although the generally available tools were more likely to generate an answer, they also were more prone to providing unreliable outputs. By contrast, the specialized tools hallucinated much less frequently but regularly stopped short of fulfilling a request if it required work beyond their guardrails.

Delegating Work

Our final takeaway was that AI was surprisingly good at issue-spotting and double-checking a lawyer’s work product. These uses can help both new and experienced lawyers.

We used the idea of delegation to make this point to our students. AI is fast, adaptable, and always available, so it’s a great resource. But you should only delegate work to it when you can verify its output.

In one exercise, students had to issue-spot risks and approaches after a “client” described a business opportunity. Students brainstormed in small groups. There was a lot of overlap, but some groups thought of items that others had not. We added the items to a collective list, relying on our years of practice to guide the students through gaps that remained.

Once we had a strong collective list of items, a team asked an AI product to issue-spot the same scenario. It generated most of the items in our list, some that weren’t relevant, and—most importantly—a couple that no one had raised.

This was a valuable lesson: AI had something to add to our analysis, but we had to exercise independent judgment to determine whether its contributions merited further thought.

Important Takeaways

We asked students for feedback on our use of AI throughout the semester. The most valuable feedback was that they wanted to develop their own legal judgment and learn how and why certain tasks are completed before relying on AI.

This echoes the transition from book-based legal research to electronic legal research. There was some value in searching the law reports in the library, but electronic legal research won out because it was so much more efficient. Yet even with this enhanced efficiency, a responsible lawyer must understand how to build a strong research plan and actually read the cases they cite.

In the clinic, our goal is student learning. It was for this reason that we liked to deploy the AI tools at the end of our exercises: You do the work and then interrogate it with the AI tools of your choice.

Such an approach ensures law students get the benefit of struggling through first repetitions of new tasks while allowing them to generate superior work product with fewer drafts. This process requires discipline. Legal education and legal employers need to clarify the line between AI as a tool versus AI as a crutch.

We learned a lot about how AI tools can help law students develop into good lawyers. As those tools are integrated into legal practice, lawyers of all experience levels should take a self-conscious approach to using them.

Federal Home Loan Banks during Financial Stress

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I was happy to participate in the discussion group process for the Government Accountability Office’s report, Federal Home Loan Banks: Role During Financial Stress and Members’ Borrowing Trends and Outcomes (GAO-26-107373). The Highlights of the report include

The Federal Home Loan Bank (FHLBank) System consists of 11 federally chartered FHLBanks that support liquidity by making loans to member financial institutions (including banks) in the U.S. As of June 2025, 93 percent of banks (approximately 4,100) were members of an FHLBank, allowing them to obtain liquidity via secured loans. GAO’s analysis found that the FHLBanks generally serve as a reliable and consistent source of funding for banks of all sizes throughout the financial cycle. They can also play a key role in the health of small banks (those with $10 billion or less in assets). This has been the case despite concerns raised in some academic and other literature that FHLBank lending could exacerbate periods of financial stress—for example, by masking problems at troubled member banks or increasing resolution costs when a member bank fails.

Banks’ FHLBank borrowing trends. From 2015 through June 2025, most U.S. banks were FHLBank members and obtained secured loans at least once. Banks’ total outstanding borrowing (as of quarter-end) ranged from $189 billion to $804 billion during this period. Although most active FHLBank members maintained relatively consistent FHLBank borrowing, a small number of large banks (with more than $10 billion in assets) drove substantial increases in aggregate borrowing at the onset of the COVID-19 pandemic in 2020 and during the March 2023 liquidity crisis. For example, large banks were responsible for 97 percent of the increased borrowing in the first quarter of 2023. However, median FHLBank borrowing as a share of median total assets generally stayed within a consistent range from 2015 through June 2025, including for large banks. This suggests that their overall reliance on FHLBank loans during stress periods was largely unchanged.

Outcomes associated with FHLBank borrowing. GAO’s econometric models, which controlled for bank health, macroeconomic factors, and economic cycles, found that higher FHLBank borrowing by a bank was generally associated with positive outcomes for the bank. From 2015 through 2024, higher FHLBank borrowing was associated with (1) increases in real estate lending and (2) lower likelihood of being flagged as a problem bank or of failing or closing voluntarily. These results were largely driven by small banks, which make up 97 percent of banks in GAO’s analysis.

Housing Stability in the Mamdani Administration

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By Phillip Capper, Wellington, NZ – 143rd. St., Bronx, NY, 2/08, CC BY 2.0

I am looking forward to the discussion tonight on Housing Stability in the Mamdani Administration, hosted by the Urban Design Forum. While it is sold out, we will be discussing “what a potential rent freeze may look like under the Mamdani administration” and I am sure there will be some good reporting on this topic over the coming weeks and months. The Forum writes,

As living costs continue to rise, Mayor-elect Mamdani has proposed freezing rents on stabilized apartments as a way to support tenants and protect housing stability. At the same time, critics warn that such measures could make it harder for building owners—particularly those managing older buildings with thin margins—to maintain safe, livable homes.

We’ll begin with an overview presentation by Mark Willis of the Furman Center, followed by a panel with Oksana Mironova, Emily Kurtz, David Reiss, and Thomas Yuon how the next administration can promote tenant stability and preserve affordable housing.

What strategies can preserve deep affordability while ensuring stabilized buildings remain financially sustainable?

More on the 50-Year Mortgage

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Marketplace interviewed me in Trump Floated a 50-Year Mortgage to Address Housing Affordability. How Would That Work? The transcript reads,

President Donald Trump proposed a 50-year mortgage over the weekend, in a social media post. The idea came from Bill Pulte, the Federal Housing Finance Agency director.

“The average age of a first-time home buyer is now 40 years old. The notion that you’d finish paying off your mortgage at 90 is probably not something that most people contemplate when they want to buy a home,” said David Reiss, a professor at Cornell Law School.

Still, in the short term, a 50-year mortgage would appear cheaper — slightly. Robert Bridges did the math; he’s associate professor emeritus at the University of Southern California’s Marshall School of Business.

“The payment on a 50-year mortgage, for instance, for a $200,000 loan at 6% would be about $1,052, where a 30-year loan would have a payment of $1,199,” Bridges said.

So that’s a difference of $147 in that example. But it comes with costs to the borrower as well, for starters the interest rate would be higher.

“You pay more for a 30-year mortgage than you do for a 15-year mortgage,” Reiss said. “So you will probably pay more for a 50-year mortgage than you would for a 30-year mortgage.”

According to the American Enterprise Institute, a 50-year mortgage would, initially, increase a homeowner’s buying power by 8%.

“Over time, maybe months, maybe years, that would fade,” said Edward Pinto, a senior fellow at the American Enterprise Institute.

Basically, if everyone’s buying power goes up, so does the price of housing. And a longer mortgage also means it takes longer to build up equity.

“And then you’re really left with not much advantage, and you become really a renter with a mortgage,” Pinto said.

A longer loan where it takes longer to build equity also leaves homeowners more vulnerable to risks in the market if home prices stagnate, which Pinto predicts they will in the coming years.

“This has been tried with 40-year loans before, and every time it’s been tried in the United States, it’s failed,” Pinto said.

Failed because they’re too risky, he said. That’s one reason we don’t already have 50-year mortgages.

“It doesn’t seem like this is really the remedy for the housing problem that we all know we have in this country,” Bridges said.

Which is first and foremost, he said, that we don’t have enough of it.

Trump & Pulte’s 50-Year Mortgage

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Politico quoted me in ‘Band-Aid,’ ‘Distraction’: Experts Slam Pulte, Trump 50-Year Mortgage Idea. It opens,

The Trump administration is entertaining a potential plan for the government to back 50-year mortgages to address a housing affordability crisis.

But, in a housing market defined by low supply, industry experts warn that changes in financing are likely to be little more than a “band-aid” and a “gimmick,” while posing bigger risks to homebuyers.

“As a country, the mortgage term is not what we should be worried about. We should be focused on building more supply,” said Troy Ludtka, senior U.S. economist at SMBC Nikko Securities America.

Federal Housing Finance Agency Director Bill Pulte posted on X Saturday that the Trump administration is working on directing government-owned housing finance companies Fannie Mae and Freddie Mac to support 50-year home mortgages, calling the move ”a complete game changer.” President Donald Trump also posted on his social media platform, Truth Social, supporting the idea.

The proposal comes after Trump directed Pulte to leverage Fannie and Freddie to ramp up the country’s stalled housing production to bring down costs and address the estimated shortage of 4.7 million homes. But the new proposal is raising concerns about whether such a major change to the two giant mortgage financiers’ buying rules could destabilize a central strength of homeownership — the opportunity to build wealth over time.

In a series of follow-up posts over the weekend, Pulte wrote that “a 50 Year Mortgage is simply a potential weapon in a WIDE arsenal of solutions that we are developing right now. STAY TUNED!” He sounded off about other possible ideas like supporting portable mortgages, which can transfer to a new property, and assumable mortgages, which can be transferred to a property’s new buyer.

An FHFA spokesperson told POLITICO, “We continue to evaluate all options to address housing affordability, including studying how to make mortgages assumable or portable.”

And a White House spokesperson said in a statement, “President Trump is always exploring new ways to improve housing affordability for everyday Americans. Any official policy changes will be announced by the White House.”

Experts expect that extending the potential length of Fannie- and Freddie-supported home loans would require congressional support.

Fannie and Freddie don’t offer loans directly to potential homebuyers; instead, they purchase mortgages from lenders to package and sell on the secondary market. This frees up resources for lenders to issue new mortgages.

By purchasing 50-year mortgages, Fannie and Freddie could make the longer-term loans more appealing for lenders to offer. With a longer loan, monthly payments could come down, but it also comes at a cost to homebuyers.

“It would lead to buyers building equity in their homes more slowly. At the beginning of the mortgage, more of those payments tend to be interest… This is more of a stopgap band-aid to address affordability,” said Gennadiy Goldberg, head of US rates strategy at TD Securities.

Sharon Cornelissen, director of housing at the Consumer Federation of America, called the proposal “a distraction” and warned that although expanding the accessibility of 50-year mortgages could lower monthly payments, “the cost of that is that people won’t be able to build wealth through homeownership.”

And as first-time homebuyers get older, the 50-year mortgage appears less manageable, Cornelissen said. Last week, the National Association of Realtors shared findings that the median age of first-time homebuyers had risen to an all-time high of 40.

“So you’ll be 90,” Cornelissen said, adding that finishing payment on a 30-year mortgage is a “stabilizing force” for people going into retirement.

David Reiss, a Cornell Law School professor and real estate finance researcher, said a move toward 50-year mortgages would require homebuyers to rethink how they save for retirement.

“We often hear financial advice that you want to try to pay off your mortgage before the time that you retire,” Reiss said. “So that’s a problem.”