Consumer Confidence

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The New Normal for Housing

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?

New Housing Starts over the past 10-years

New housing starts is of January 1^st of each year.

2004                           1,911,000

2005                           2,144,000

2006                           2,273,000

2007                           1,382,000

2008                           1,064,000

2009                              490,000

2010                              614,000

2011                              630,000

2012                              723,000

2013                              898,000

2014                           1,000,000            this year will be a turning point for housing and the economy.

Average annual housing starts over the past 10-years is 1,312,900.

As housing goes so goes the economy. 

New Norms for Ex. Home Sales & New Housing Starts?

What happened in the last part of 2013?
Interest rates are moving up!
The Fed will have to ease very quietly and cautiously away from their bond buying program or inflation will spiral out of control. The question remains: will the Fed succeed?
In any case, I believe we have new norms for the existing home sale benchmark. And new housing starts will be much lower than the historical norm.
There will be unfortunately unintended consequences of their actions over the past 7-years.

Median Price of Existing and New Homes

The median price of homes nationally will give an overview but it doesn’t reflect local market conditions. Remember, interest rates are on the rise, supply is down and demand remains steady.

The median home price for existing homes has increased 14.2% since 2010. This increase, in most markets, would erase the decline experienced during the great recession. Current median price of an existing home is $197,700.

The median home price for a new home has increased 21.8% in the past 4-years and is currently at $270,200!

Remember, interest rates are on the rise, supply is down and demand remains steady.

2014 is the last year for the foreseeable future to buy a home you can afford! Don’t take my word for it; you owe it to yourself to find out if this is true. Especially if you want to sell or buy a home!

Apologize

Do you agree with this statement?
Do we expect politicians to apologize or say I am sorry? I am sorry to tell you but they never do!