If there is one thing that is not lacking these days are stats
on housing. Yesterday it was reported that pending home sales dropped in
December – which of course in the middle of winter says that the market is
softening. GO HERE
Words like moribund, decline, and hope are thrown about. And
even though there was an slight uptick in new single-family homes, the overall
growth for the year was just 1.2%. Hardly a turn around in an industry that is
faced with monumental problems. Many of which are started in Washington D.C.
Housing sales, new and existing, face a number of serious
obstacles. The largest may be the student debt load carried by many of those
under thirty. Tens of thousands of dollars of debt will make qualifying almost
impossible. And then there is the issue of the down payment, and even with
parents helping, banks are hesitant to loan out money to single people (an
increasing demographic stat), young couples with little or no money in the
bank, and debt. Even though the average interest rate on a 30-year fixed is
3.66% it means nothing if the bank tells you, “You are not qualified.” Any
surges in home loans at the moment seems to be a result of refinancing – not
outright home purchasing.
Maybe it is because the young homebuyer is getting smarter.
The markets on the coasts (New York Metro to Washington D.C. and Northern California)
are just crazy with affordability the least important issue – these are sellers
markets at the moment and the Millennials can afford to sit on the sidelines.
Once they are locked into a decent apartment the need for a house lessens – for
now. And in many markets the only housing under construction is apartments
There is the usual push by Washington to mess with Fannie
Mae and Freddie Mac and take their profits and push them into funds that can be
used to dole out favors to states and other bodies to build low-income housing
and rehab existing. GO HERE
All this completes in the overall housing market making it unprofitable
for your average merchant builder to compete in the affordable home market – so
they don’t. It is not worth the effort. If there is one area where there is
little competition to keep pricing down or competitive it is the affordable
home market and the non-profits that drive the market. Next time you see Jimmy
Carter swinging a hammer tell him thanks.
Keep in mind that the mortgage market is controlled by the
federal government and through their various agencies almost all housing
development is controlled by Washington through grants, Freddie and Fannie,
affordable housing trust funds, and housing finance laws and banking
regulations. Makes you all warm and fuzzie about markets, capitalism, and the
plight of the homebuilder.
And lastly housing affordability has hit a six year low. GO HERE
This past June the average mortgage payment represented
16.3% of a household’s income (except on the Coasts where it has to be at least
twice that). The dream of a your own home for many under 35 is becoming just
that – a dream.
Stay Tuned . . . . . . .
