EXISTING HOMES
Existing home sales has always had a benchmark of about
5,000,000 homes a year being transferred in ownership. The traditional concept
was for first time homebuyers to enter the housing market by buying a
condominium, townhome or entry level single family home. They used the equity
to move-up as their family expanded.
The senior market down sized and moved to retirement states
such as Arizona and Florida. This migration has slowed down because being close
to family is better than all of the sunny days. The downsizing was the first
step toward assisted living.
Changes to establish a new norm:
Millennials are not buying because
they want the flexibility and witnessed the erosion of equity but will not
appreciate the housing price rebound now taking place
The “baby boomers” are wedged
between aging parents and their children still living at home or needing
financial assistance. As this generation retires, they will be aging in-place. After
all, how many families can afford a $5000 PER MONTH assisted living cost?
Family formations are well below
historical levels and the ability to get ahead is not so clear anymore. Even
with two wage earners, their buying power is dampened by college loans, bad
spending habits and tight credit.
During the late ‘90’s to mid 2000,
the average time families moved was about 4-years. They are now moving about
every 7-years and this will lengthen as the economy continues to suffer.
The 5,000,000 existing home sales per year is no longer the
correct benchmark determining the health of the industry.
What do you think the new norm will be?
NEW HOMES
For years, new home construction had to keep pace with
population and demolition of older housing stock. This benchmark has always
been 1,200,000 annual new housing starts.
What do you think the new norm will be?
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