There was a homebuilding boom in 2000- 2005 because demand for homes was through the roof. Everyone needed to have that new five-bedroom house, so housing starts – an indicator that reflects how many new homes are being built – skyrocketed. Then the housing market collapsed. And we saw new home construction crash during the recession. But the economy slowly began to recover after 2010. Unemployment started falling. Wages slowly started to increase. Consumers gained confidence and were spending again, and they were ready to buy new homes... The only problem is that homebuilders didn’t keep up with demand. Even though housing starts gradually increased, demand still far exceeds supply. The problem isn’t that there aren’t enough people selling homes to match the number of buyers... It’s for lack of inventory.
OUTWITH THE OLD... The chart to the right shows the ratio of houses for sale versus houses sold. When the ratio is low, it tells us that buyers have few homes to choose from. The homes that are on the market are extremely old, too. According to the National Association of Home Builders, the median age of owner-occupied homes in the U.S. is more than 35 years. More than half of all homes were built before 1980 and 38% were built before 1970. When potential home buyers – consumers who have benefitted from a growing economy and a raging bull market – are looking for new homes, a 30- or 40-year-old house isn’t first on their list. They want something new... a house that doesn’t need constant maintenance and repairs. The point is that there are too few homes buyers want on the market today. More homes need to be built... Period.
New homes surge then collapse...
2,100 1,900 1,700 1,500 1,300 1,100
Homebuilders try to catch up
900 700 500
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