New homes. They’re expensive, chintzy, hastily-built and typically arranged in dystopian, crowded rows, such that yours is both indistinguishable from your neighbor’s and close enough that you can hear him scream at his wife for going over budget at the grocery store.
The American dream is truly alive and well. Now who wants a new home?!
693,000 people in 2024, as it turns out. That’s the answer. 693,000 people will buy an overpriced, poorly-made, cookie cutter box in America this year, if March’s pace was any indication. That rate was ahead of the 668,000 consensus expected from data released on Tuesday.
February’s pace was revised lower, magnifying March’s percentage gain. 8.8% counted as a big beat and also as the largest increase since December of 2022.
To be fair, not every new home in America’s poorly-built. Only the ones people can afford. The ones people can’t afford are quite nice.
I jest. Not really, though. America (and the developed world more generally) is spiraling towards a future of rampant homelessness thanks almost entirely to out-of-control shelter prices.
Some of you might argue that homelessness in America is more a function of the country’s mental health crisis, or else a side effect of the drug epidemic. As if that somehow absolves us as a society: “It’s not a housing affordability crisis, dammit! It’s that we’ve driven everybody crazy and everyone who isn’t crazy’s on drugs. The residual is a nationwide affinity for camping. Ahh, the great outdoors!”
Tuesday’s government data showed the median new home price rose 6% MoM in March to nearly $431,000 or, in wealthy terms, one Dawn Silver Bullet, assuming your bespoke demands aren’t totally outrageous and your negotiating skills are a semblance of shrewd.
March’s median price was the highest since August, when the onset of a three-month bond selloff drove mortgage rates sharply higher and builder sentiment sharply lower. The YoY decline, 1.87%, was the shallowest since last summer.
The average price for a new home sold in America last month (which is to say the price that’s sensitive to outliers, including and especially on the luxury end of the market) rose to $524,800. (“Congrats on your bespoke Silver Bullet, Mr. Johnson, it’s truly extraordinary.” “Thank you. Out of curiosity, if we made it $525,000 even could you toss in that eight-year-old Continental GT over there? My daughter turned 16 yesterday, according to my wife.” “Oh certainly. I’m sure she’s a wonderful young lady.” “I would’ve divorced her if she wasn’t.” “I meant your daughter, Mr. Johnson.” “Oh. Probably. To tell you the truth, I’m so rich I forgot I had her.” “Ha! Happens to the best of us, sir.”)
According to an April 19 update from Redfin, the median price for a luxury home in the US was $1,225,000 in Q1, up nearly 9% YoY and a new record. Sales of luxury homes rose 2% over the same period compared to a 4% drop for non-luxury homes, the linked article said.
“Luxury sales are outperforming partly because elevated mortgage rates aren’t a deterrent for many luxury buyers,” Redfin’s Dana Anderson remarked, adding that nearly half of all luxury homes sold were purchased in cash during the first three months of 2024.
In a separate article published Tuesday, Anderson editorialized around the results of a Redfin-commissioned survey of roughly 3,000 US households. Among other things, the poll asked, “If you were looking to purchase a home, do you think you could afford a home like yours in your neighborhood today?” Nearly 40% of respondents said no.
Politicians who channel this resentment are gaining ground. In the USA, it’s through blaming immigrants, the Chinese and woke ESG rules.
Personally, I think the problem is the Boomers.
There are about 75M Boomers in the US, between the ages of 60-78, who aren’t selling their homes and downsizing – compared to the historical trend for the past 20-30 years, due to their low (sub3%), 30 year mortgages.
Boomers collectively own about 55% of the 128M privately owned homes in the USA (see statista). Therefore, 70M homes are being “turned over” to younger generations at a much slower rate, compared to the historical rate from the past 20-30 years.
Deaths rates for people in the US in the 60-78 age range are between 4%- 12% per year. Assuming an average of 6%, then maybe 4% of the houses owned by Boomers (only 2.8M) become available for sale every year, due to the passing of the homeowners.
The home ownership rate for people in the USA under the age of 35 is only 12% and for people in the 35-54 age range, it is only 34%.
This could take awhile for homeownership rates to go up for younger generations.
Maybe the fix is to ban healthcare for anyone over 65. Oh wait, that includes me.
I’d say mental health and addiction are more likely symptoms than causes of homelessness. Not having shelter is just right above not being able to find food on the list of human needs. You can go days without eating but everyone needs to sleep every day.
Ah yes. But you do not need a home to sleep. Sleeping in houses, fixed in a place, is a relatively new phenonemon for humans. Most of our existence we were nomads.
Eating on the other hand, 99% of us, couldn’t figure out our own food if we did not have grocery stores to buy from.
I have left my house (renting it out) and live in an RV, sleeping freely on public lands. We’ll see how long it lasts until city people decide that occupying space is not free anymore.
Higher median prices insure that normal to below normal earners have low access to shelter. Its not just the prices per se, but the mix of available units. No developer wants to create new low cost housing. They can’t make any money on it. (Same with cars). RE theory continues to support the “trickle down” process. Income goes up with GDP growth, new houses get built, higher earners buy them and leave their existing housing, not worth as much, to trickle down to those making lower incomes. The trouble is in most places, this just doesn’t happen any longer. Older homes today just end up dilapidated and abandoned and there is little shelter for the homeless not available at REI or Dick’s. We offer subsidies and tax abatements for developers building high class commercial real estate and huge mixed multi-use projects. Apartments used to be a solution, but no one wants to build them (or own them). Want to house the homeless, take a hike. These days not only are prices high, but the mix is all wrong, mostly driven by greed.
This is an interesting article:
https://www.globest.com/2024/04/19/new-multifamily-supply-wasnt-built-for-hybrid-workforce/
Claims developers built small units (studio/1-bdrm) to maximize rent/sf, but in post-pandemic hybrid-work world renters want larger units, hence a market mismatch. “cited Washington, DC as an example of a market where there is an oversupply of one-bedroom apartments — 43% of the units in DC are one-bedroom, but only 15% of renters in the DC metro are looking for them and, in certain markets, it’s only 8% of renters.”
In my city, developers were all in on building studios and 1-bdrms. Just scanning Craigslist for my city I see for-rent ads for 3,346 studios, 3,309 1-bdrms, 2,910 2-bdrms, 336 3-bdrms. That is both new and older units.