Wednesday, November 16, 2011


I've been following the housing market for years and there are many reasons that new homes are tanking including banks reluctant to make loans on new homes, unemployment, resales including the ever-dropping cost of buying foreclosed properties and the erosion of the middle class.

But there are other reasons that you don't hear about so often that are just as damaging to new home construction as the ones mentioned above.

Let's look at 5 of them:

Multi-generation households.  Boomers are seeing their children moving back home in increasing numbers because of the economy and at the same time their elderly parent(s) can't afford to stay in their own homes and move in with their children.  No new home sales here.

Aging Baby Boomers.  A lot of middle class boomers lost their jobs, watched their home go under water and sold at a loss.  They are now moving in with their children.  Not only is there no new home sale here, there is another short sale used home on the market.

No Opulence.  The days of the McMansions is over. The 1% don't want to "show off" like they did pre-2007.  The huge homes of the past are up for sale and nobody is rushing to buy them.  The homeowners want to downsize but can't until they sell, and probably at a loss.

Age-restricted Communities.  Tract builders are finding that a lot of Boomers don't want to live in granny flats and guest houses anymore.  They want to live in smaller duplexes with similar minded people.  Very few modular homes are sold to this market which for now is controlled by the big tract home builders.

Deteriorating infrastructures.  In a lot of areas around the country, the municipal services are not able to keep up with the current demand because of budget cuts.  Proposed new communities and even in-fill lots are being tabled until revenues improve.  Aging water and sewer lines, strained public services will keep older towns and cities from attracting new home builders.

There are so many problems facing the housing industry that economists are now saying that we won't see a good solid homebuilding number until 2017.  Yuck!

No comments: