HOUSINGNEWS REPORT
MY TAKE
I think that this is a very reasonable hypothesis which could lead us to see low inventory levels for a lot longer than many think. With little assistance from the new home market, I believe we will suffer from low inventory levels until well into 2018. Our best hope for a more balanced market lies with builders, so hopefully they’ll be allowed to do what they do best – build more homes.
to find a job that matches their skill set. There has been a tangible drop in geographic specificity of occupations. Where we used to move to find work, this is no longer as prevalent, which means we are moving with less frequency. Thirdly, as mentioned earlier, builders aren’t building as many homes as they could. This is essentially due to three factors: land supply/regulation, labor, and materials. The costs related to building a home have risen rapidly since the Great Recession, and this is holding many builders back from building to their potential. Furthermore, in order to justify the additional costs, many of the homes that are being built are larger and more expensive, and this is no help for the first-time buyer who simply can’t afford a new construction price tag. Fourthly, while the general consensus is that home prices have recovered from the major correction that was seen following the recession, this is actually not the case in some markets.
In fact, there are 32 U.S. metro areas where home prices are still more than 15 percent below the pre-recession peak. As equity levels remain low, or non-existent, in these markets, many would-be sellers are waiting until they have sufficient equity in their homes before putting them on the market. And there is still one more issue that is certain to become a major factor over the next few years: interest rates. Imagine, if you will, the country a few years from now when interest rates have normalized to levels somewhere around 6 percent. Now consider potential home sellers who are happily locked in at a mortgage rate of about 4 percent who are considering their options. Will they sell and lose the historically low rate that they currently have? Remember that for every 1 percent increase in rates, buyers can afford 10 percent less house. If they don’t HAVE to sell, their thoughts may lead to remodeling rather than moving.
MATTHEW GARDNER As Chief Economist for Windermere, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew is the former Principal of Gardner Economics, and has over 28 years of professional experience both in the U.S. and U.K.
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JULY 2017 | ATTOM DATA SOLUTIONS
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