housing market

The One Chart That Explains Why You Can’t Find a Home to Purchase

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Summer is not only the time every school age child looks forward to, it is also the traditional time of year that many families eagerly look forward to buying a new home. In fact, historical home sales data shows that the month of June is typically the busiest month for buying and selling real estate. As the school year ends, families execute plans they made in the spring to move to a new school district or buy a larger home. This year the challenge that many will face is the shortage of affordable homes available to buy.

This shortage of available housing is not a short term problem. With an ever growing population and housing construction that lags way behind the country’s population growth, the lack of available housing will continue into the foreseeable future. While news headlines have covered the annual increase in housing over the past five years, the actual data shows that the number of homes for sale is still at record lows. When you look at the actual amount of new homes being built and take into consideration the continued population growth, a clear picture comes into view of what challenges still lie ahead for potential homebuyers (refer to graph below).

Keep in mind that the “increase” in new home construction in 2016, compares to the same actual levels of new construction in 1982, when the country was in the midst of a deep recession. However, after the 1982 recession, home construction immediately and significantly rose again in 1983. There is no such increase in new homes being constructed in 2017 and the population of the country has increased by over 100 million people since 1982.

Want to know why home prices keep going up and you can’t find a home to buy? It’s a simple matter of supply and demand. There is an ever increasing demand driven by a growing population and a lack of inventory of homes for those buyers in the market to make offers on.

With the current rate and foreseeable future of new home construction remaining stagnant, this won’t be a short-term problem but rather a systematic long-term challenge for many trying to buy their first home or next home. You can expect home prices will continue to rise and affordable housing options will be in high demand driving up prices to even higher levels. The supply of new and existing homes available for sale across the country will remain very tight.

Homeownership is not just part of the American dream of freedom and independence, but also the number one way for most people to improve their long-term financial security. While it may be costly this year to buy a home, more than most likely it will be even more expensive next year. The law of supply and demand won’t change. Your best bet is to sit down and build a personal plan to achieve your family’s home ownership goals and financial needs and begin to take action to achieve those goals. On this topic, time is of the essence.

Best wishes for a fantastic, fun-filled summer and a successful home buying season!

Peter

Gen X is Turning 50 and They’re Stuck in Their Homes

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The leading headlines on the future of the housing market typically read, “Get ready for the millennials!” If not that, the alternative subject line highlights the number of baby boomers retiring and whether they will move to the coast, move to be close to the grandkids or just stay put. In between the two is a generation of high wage earners that is mostly ignored in the national housing conversation. This doesn’t occur only in the housing market, the majority of news coverage in the last election was given to the, “We don’t want to change” boomers and the idealistic “We want the world to change” millennials. In the middle, described by some authors as the middle child, is Gen X. Once described as slackers, they are now in their prime earnings years and have the highest average income of any other bracket of consumers. Gen X who grew up on grunge music, wearing ripped jeans and flannel shirts has grown up and is very influential in the business world and yes, many are stuck in their homes.

I don’t view Gen X as having a middle child generation syndrome, despite not being written or talked about as much as the older and younger generations they interact with. I view this generation as the link connecting the baby boomers and the millennials. They have an understanding and share interests with both generations. While sociologists and the census bureau will give a different date range for members of this generation, I use the simple definition that identifies Gen X, with individuals born the first year the birth rate in the country began to once again decline after its continuous rise post World War II, 1965 to 1980 and the start of a new decade of patriotism. In all cases, generations are defined by a certain birth date and a general world view outlook.

Gen X understood the values of the baby boomers but challenged them with the indifference that went along with growing up as latchkey kids who either had two working parents or were part of a family separated by divorce. They went to college, got married, had kids, some got divorced and began to change social norms and alter the direction of popular music. It wasn’t the millennials that took the popularity of tattoos away from the exclusivity of bikers, gangs and members of the military. It was Generation X that started that trend, although for most it was more conservative and hidden than you see today. They looked at race differently, birth control was the norm, as was women being in the workplace. They don’t feel ignored like a middle child, but rather are often indifferent and are adept at independently figuring things out, which all goes along with growing up as a latchkey kid. They went to school with computers and are very proficient at technology, and unlike the millennials, can freely turn the technology off.

While the housing shortage across the U.S. appropriately discusses the impact to first-time millennial home buyers, Gen X was hit the hardest during the real estate down-turn that began in 2007. Some still own homes with negative equity and those with equity have the challenge of where will they move to, if they sell their home? The housing shortage has a negative impact on upward mobility for Gen X. With housing construction still below historical rates, and homes available in areas where Gen X want to live, in even shorter supply, balance of lifestyle is not just a millennial desire. The American story of moving and advancing to that next community or larger home every 5 years is gone.

The macro issue of more homes being available is a broader challenge that would require government, new entrepreneurs and businesses working jointly towards a solution. In the interim, what can members of this generation do if they truly want the step-up move? There is a solution that could work in certain markets and that is selling their home and then leasing it back to them for 60-90 days so they have time to search for a home with the money already in hand for the down payment. Under this scenario, a new buyer can purchase a home they want and can afford, and Gen X can have the time and the money to be more diligent about finding the next size home. After all, it is a generation that is accustomed to creatively figuring things out.

To the early Gen Xers, a happy 50th birthday wish to the likes of Dave Matthews, Billy Corgan, Keith Urban, Tim McGraw, Faith Hill, and Will Ferrell who are all turning 50 this year. Know someone who is turning 50? Send them a text wishing them Happy Birthday, they are also the generation that texts the most.

Best wishes to all who are pursuing owning their dream home.

Peter