Guest Post by Dr. Housing Bubble
One of the many interesting dynamics of the current housing market is the lack of new home sales and also, new home construction. New housing construction tends to be a boom for the economy across all income levels. Why? People when buying a new home also tend to fill the house with the general crap that occupies a place (i.e., new beds, stoves, microwaves, televisions, etc). This crap filling exercise sets off an avalanche of economic activity. You also have construction and the inherent supplies that go into building a new McMansion. Yet the new home buying audience in Millennials tends to be in a tighter economic position than their Taco Tuesday baby boomer parents. For these reasons we have an unusually large number of grown adults living at home with parents. It is highly doubtful that these grown adults are suddenly going to cause a surge in more expensive home buying. But the new home buying that is happening is going to a smaller group of people pushing prices higher on a small amount of inventory.
New home sales dynamics
With inventory in the market still being tight, it is surprising but not shocking that home builders simply are not out in the market aggressively building homes. You have this big group of younger adults but are they going to mimic the trend that followed the baby boomers? That is the big question and so far it doesn’t seem to be the case.
Take a look at this chart:
