A New Housing Crisis
According to a recent article in the Wall Street Journal, “America is facing a new housing crisis. A decade after an epic construction binge, fewer homes are being built per household than at almost any time in U.S. history.” In fact, housing starts, while up from the bottom, are still lower than the recession lows in the 80s and the 90s
What makes the slump puzzling is that by most other measures, the American economy is booming. Jobs are plentiful, wages are on the rise, and the stock market is near record highs. Millennials, the largest generation since the baby boomers, are aging into home ownership.
A New Housing Crisis
Bob Snowden, a home builder in the Grand Rapids, Mich. Says, “Demand for housing is stronger than he has ever seen, he says, but land and construction costs have roughly doubled since the end of the last boom a decade ago.”
Locally, as reported by News PressNOW.com, “Statistics released last week by the St. Joseph chapter of the Kansas City Regional Association of REALTORS show a nearly 23 percent drop in sales for the month, to $8.6 million from the $11.1 million logged for February 2017.”
“And the news didn’t brighten much better for local agents for year-to-date numbers, which revealed more than a 5 percent drop in sales so far in 2018. The transactions amounted to $21.8 million as opposed to the $23 million for the same period last year.”
In a recent post, I asked Why Not Build?
The initial negative is convenience, says Jean Folger at Investopedia. You can’t just move in. Not only do you have to find the land, which will very likely not be in an existing neighborhood, you also have to factor in the time to find an architect or builder, and choose every element of the new structure. You also need to worry about systems, such as whether the land gives you access to municipal water and sewage, or requires a well and septic system, along with any environmental and other permits.
Bob Snowden says, he gets calls practically every day from families in the thriving western Michigan city asking him to build them a new home. He ends up turning most of them down. Demand for housing is stronger than he has ever seen, he says, but land and construction costs have roughly doubled since the end of the last boom a decade ago.
A combination of tightened housing regulations, a lack of construction labor and a land shortage in highly prized areas is driving the crisis. It is hard to make money with lower-priced houses for first-time buyers. So Mr. Snowden has shifted his focus from starter and mid-price houses to high-end properties, where the profit margins are fatter.
I wish I had a solution to a new housing crisis. I would be interested in your thoughts. This story is so important that we will be revisiting it from time to time.
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