Key Highlights
- Most housing stats split between record lows and record highs
- Current housing market defined as “perfect storm”
Most All Housing Statistics at Record Lows or Highs
Take your pick of important housing statistics…home prices, inventory, percentage of homes selling above list prices, time on the market…and all of them, not just one or two of them, are at all-time record highs or lows.
How Long Will Wild Market Last
According to the economics writer who predicted the 2007 housing crash, Bill McBride told The Atlantic,“In my time studying housing markets, I’ve seen bubbles and I‘ve seen busts. But I’ve never see anything quite like this. It’s a perfect storm.”
The two most predictive statistics of both this current market and the future housing market are supply and demand.
How Is Demand Predictive?
Looking first at the demand side, demographics and specifically Millennials, the largest generation in US history, are driving the current housing market.
Millennials now have the financial where-with-all to buy houses after being financially limited over the previous decade. Also, Millennial homebuyers, as well as other homebuyers, are cash flush with the national savings rate skyrocketing to its highest level in decades, according to the US Bureau of Economic Analysis and the Federal Reserve Bank of St. Louis.
And Millennials are chomping at the bit to buy housed particularly since interest rates have touched record new lows
Migration patterns also play into this demand cycle. Families, especially high-income families with remote working opportunities, want sunny, spacious real estate. When those families migrate from multimillion-dollar homes in say Los Angeles or New York, those families can afford to buy a million-dollar home in Idaho or Texas or Florida that cost “only” $500,000 a year ago.
How Is Supply Predictive?
New home building essentially collapsed during the housing crisis of 2007-08. Many, many homebuilders and construction workers closed up shop and/or migrated to other professions. Then, the pandemic “paused” new home building just as it was beginning to get its legs underneath itself.
Boomers, who own 54% of the nation’s housing, are more likely to “age in place” rather than downsize and release millions of homes to the for-sale inventory.
Additionally, new homebuilders have seen lumber, a material essential to new home building, prices triple within the last year. The homebuilders response? Simply delaying their projects at a time when the country needs a construction boom.
What’s Going to Happen Next and When?
McBride, the economics writer and predictor of the housing crash in 2007, said, “It’s not clear at all to me that things are going to slow down significantly in the near future…Demand will be high for a while, because Millennials need houses. Prices will keep rising for a while, because inventory is so low.”
Should Buyers Commit Themselves to Current Craze or Wait?
According to McBride, it’s hard to say. BUT, “…if you’re in a market where you consistently have to spend significantly above listing, I wouldn’t buy right now.”
Continuing, McBride said, “I think when you put everything together, the odds are that things get more normal in a year.”
Thanks to The Atlantic.
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