Wednesday, January 21, 2015

Why is the housing market only recovering for the rich?

Why is the housing market only recovering for the rich as builders break ground for more McMansions?

Here’s the first problem to overcome, particularly with the president’s focus on the middle class: we have two housing markets, one for the rich and one for the rest. The only home sales growing are for million-dollar properties. Home purchases made entirely in cash are historically high.

Simply building more homes and increasing the supply of houses won’t bring down prices. The homes being built are bigger than ever, and increasingly designed for the luxury market.

Consider this incredible statistic from the research analyst Redfin: through last April, sales of the McMansions of America – the top 1% of homes by price – rocketed up 21% compared to last year. But sales of the other 99% of homes were down 7.6%. 

It’s not even clear that rising home prices – traditionally a way to measure a recovery – would be good for the middle class. Price increases harm the affordability of homes, particularly for first-time homebuyers, who have not returned to the market at their historical level. This is an important group: first-time homebuyers drive the entire market, allowing sellers to step up into bigger homes.

CLICK HERE to read the entire 'theGuardian' article

1 comment:

Anonymous said...

Some of the majors are recognizing that the days of high margins promoted with expanded sq footage is ending and moving to lower priced first or second time buyer particularly in the South.

Of course, the cost of developed lots continues to impact total price as the "A" and "B+" lots are in short supply with premium pricing

Modular may provide some solutions but scale of development is still being addressed by many builders based on price per sq ft and depressed labor costs in the South coupled with lower appraisal numbers.

If developers and builders would consider in-fill subdivions utilizing modular maybe needs could be meet but not hopeful.