Housing Crisis: The Right House At The Right Time May Be Hard To Find

Right now, the residential housing market is teetering out of balance in several ways:

  1)  25% of US home sales were cash transactions in February 2016. This is an unusually high percentage, and it seems to indicate real estate investors are buying a large percentage of homes. Parents and grandparents furnishing cash for their kids and grandkids is another likely reason for cash sales.
   2)  Job growth is slow and mortgage money is tight, which is not a good combination for the sale of existing homes or for stimulating new construction.
    3)  Millennials (entry-level buyers) often have a distinct preference for personal choice and flexibility in living arrangements and locations. That means they may prefer to rent rather than buy a home. Eventually, however, many will start families and want to buy homes.
   4)  Paying off college loans and saving for a down payment at the same time is increasingly difficult, especially when good-paying jobs are harder and harder to find.
  5)  Seniors (active, retired and soon-to-be retired buyers) often have a preference for comfortable, convenient living spaces, complete with amenities. Their choice to rent or buy may be dependent on the type of unit available in the location they desire, with the features they want. Senior communities catering to active adults are increasingly in demand.

These factors and others led Myles Udland to post the following on Business Insider this week, “The problem is there might not be enough houses, at the right price points, to go around.”

Some people are calling this situation “the new housing crisis,” including Udland.

Ralph McLaughlin, posting on Trulia’s blog, writes, “America is experiencing a housing shortage. Not only are there fewer homes available to buyers of all income levels, those just starting out or making their first foray into home ownership are worse off than they’ve been in years. There are fewer homes available, and even if they can find a home, it’s likely to be more expensive.”

So, what’s the solution, besides selling houses to investors for cash, to become rentals or to be remodeled and re-sold at a profit?

Glenn Kelman, CEO of Redfin, posted the following on CNBC.com, “When we talk about a city's cost of living, we don't mean food, transportation or clothing, which cost about the same everywhere. We mean housing.

“We need a government policy all-out in favor of more, denser housing.

“Housing is in short supply. For the 40 years prior to 2008, ground was broken on an average of nearly 1.6 million housing units per year. Starts over the past seven years averaged 788,000; even in 2015, a boom year, starts were only 1.1 million.”

Maybe Kelman is talking about co-op apartments, condos and zero-lot-line homes when he says, “denser housing.” That’s how I understand the phrase, and it’s also how I understand the needs of a swelling senior population as well. Maybe getting federal, state and municipal support for denser housing is a good idea.