Guest Post by Lance Roberts
“Everyone wants a house, and that’s a big problem.
We’ve noted in the past that there is a substantial issue in the housing market right now. Too few homes are being built for the number of people that want to move into them, thus driving up prices and keeping some lower-end or first-time buyers out of the market.“
It is quite amazing that amount of optimism surrounding the housing market which has yet to recover substantially from post-financial crisis lows given the exorbitant amount of monetary stimulants injected into it.
The chart below shows the Total Housing Market Activity Index which is a composite of new and existing home sales, permits and starts. Yes, housing has recovered, but remains well below levels seen in 1999.
But let’s not let a trivial matter of data get in the way of a good story.
“Meanwhile, according to the Conference Board, although the share of households planning on buying a home in the next six months ticked down in April to 5.4%, that is significantly above the average of 3.6% recorded since 1978,” wrote Matthew Pointon, property economist at Capital Economics.
While individuals may CLAIM they want to buy a home when asked, there is a massive difference between “wanting to do something” and actually being able to do it.
Notice in the chart above that the spike in “home ownership desires” spiked in 2011 and has been steadily climbing since then. Surely, if we have a record number of households planning to buy a home, that should be reflected in the home ownership rate as well.
Considering that almost 80% of Americans can’t meet small emergencies, 1-in-5 families have ZERO members employed, and incomes are less than they were in 2000 – the chart above makes a good deal of sense. It is also why we have seen the rise of the “renter nation.”
Of course, I am assuming that Matt Pointon wasn’t talking about the newest fad in housing for Millennials: The 150-sq. ft. micro-home.
Impressive foundation.
The only young people that I know of that have bought houses in the last 8 years were only able to do so with substantial assistance from family. What do I mean by substantial assistance? One case a parent paid cash for the house and the young couple is paying back principle only. Another case the parents paid the down payment which was large enough so that the couples monthly housing cost is less than they would be paying in rent.
In my metro a lot of the sub $200/k sales (starter home in this market) have been gobbled up by corporate entities that are renting them out. I’ve heard some of the millennials complain about that as they can’t even schedule a showing before a listing is sold. Move up to the +$300k zone and that’s not a problem but that’s a smaller pool of buyers. Guess the +$1M sales are really bad from what an agent told me recently.
Frankly I don’t see the big deal with young people being renters. Circa 2005 I knew people going right from college graduation into a job offer and home buying, not even slumming it in a crappy apartment and saving for the house. Home ownership rates back to 1980’s level isn’t a big deal in my book.
Wonder how that micro-home does in high winds?
I kind of like the tiny houses… here’s how that one looks on the inside:
http://inhabitat.com/tiny-collingwood-shepherd-hut-on-wheels-is-inspired-by-19th-century-mobile-homes/collingwood-shepherd-hut-gute-18/
In my building in Chicago, three condos have sold for pretty good prices in the past two months. All the buyers are foreign; one family from Dubai, another from India. Going to be interesting to see if the trend holds.
“After wandering higher for the past two weeks, mortgage rates reversed course, pulling back to near yearly lows.
The retreat began last week after the Federal Reserve met and expressed concerns about the economy. Then came the report that the gross domestic product grew an anemic 0.5 percent in the first quarter.”
Why do we keep hearing how obama saved the economy, saved the market, saved jobs, if the real economic news is in the toilet?
I’m beginning to sense that the only hope we have lies with Trump.
Wife and I were just talking, sell the business, sell the house in the burbs, buy some land along a river, build a 800-900 sq foot house.
Put in a garden, fruit trees, chickens, goats, fish the river, hunt deer, unplug and find some peace.
They should chock the wheels on that thing lest they wake up in a strange land.
Hey, look guys, liberal bastion Ann Arbor is doing everything it can to make affordable housing!
This is just so awesome! For slightly over ONE MILLION DOLLARS, they are acquiring two existing homes, making them into apartments, and renting them out to the politically favored members of the low-wage crowd!
http://www.mlive.com/news/ann-arbor/index.ssf/2016/05/2_houses_in_water_hill_neighbo.html
Dude, dude, dude! This is so awesome! Only $167,000 per modest little apartment unit! Now that’s affordable! (Never mind that you could buy a brand-spanking new 1000+sf 3-bedroom ranch on its own lot for that if you drive 10-12 miles in any direction from this location.)
This is fucked up.
It’s exceptionally difficult for young people to buy homes in the UK too, we’re seeing the exact same problem. Indeed, it’s worse here because land (and therefore property) is at a premium.