July 3rd, 2019
Affordability, Wages and Demographics Cause Shifts in Housing Strategy
Of late, home prices have climbed while wages have failed to keep up, leaving a gap between the current housing market and affordability. According to Lending Tree analyses of the homebuying market, home prices have increased by 44% while wages have only gone up by 15% since 2012.
Further, a Freddie Mac survey on housing affordability released just a few days ago revealed that more than half of Americans have made either spending changes or housing changes to afford their monthly housing payments.
By now it’s clear that the dream of homeownership has become more difficult for some Americans. Availability and cost of land, labor shortages and building material prices are all contributing, putting much of the available inventory into ranges that only the wealthy can afford.
And it’s more widespread than you might think. We often attribute affordability issues to famously expensive places to live, such as New York, San Francisco and Los Angeles. But reports are showing that the trend is trickling into traditionally affordable markets as well, with nearly every major metropolitan area showing decreases in affordable homes inventory, according to a 2019 Redfin study.
Demographics play a role too.
All the forces seem to be working against each other in the housing market, creating an imbalance. On top of all this, we are also witnessing a shift in homebuyer demographics with millennials considering home ownership. As I detailed in a recent blog around this new generation of homebuyers, the desire for low- or no-maintenance properties, environmental features and affordability are steering first-time buyers away from traditional single-family homes, leading many to pursue renting over buying.
As we all know, home sales are a key driver and indicator for both new and restoration and remodeling related door and window sales. The View from Here is that we will see homebuilders continue to adapt with a focus on more affordable, multifamily homes with more sustainable, energy-efficient features. As an industry, we must stay on top of these trends and adapt as well.
What’s your View? Email me directly at firstname.lastname@example.org.
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