The above subject line is the title of this Forbes.com article. The author focuses on the supply of houses, shifting demographics and massive pent up demand.
From the 1950s through the early 2000s, an average of 1.5 million new homes were constructed every year in the U.S.
But, over the last ten years, we have averaged only 900,000 new homes per year, creating a massive supply shortage.
The 2008 crash was an anomaly b/c the several years leading up to it were the only period where housing was overbuilt – with excess supply getting absorbed by flippers and speculators with access to easy financing.
“A TIDAL WAVE OF HOMEBUYERS IS ABOUT TO FLOOD THE MARKET”
The above quote is from mortgage and housing expert Barry Habib, a person I’ve referenced several times in my blogs and as recently as September 19th.
Habib pointed out that on average folks buy their first home at age 33 while the average age of Millennials is now 34.
This is significant b/c Millennials are the largest and most affluent generation in American history and they have been on the sidelines for years.
Another source corroborating the “Coming Housing Boom” narrative is yesterday’s Seeking Alpha podcast with Alex Pettee of Hoya Capital Real Estate.
Mr. Pettee focuses on insufficient supply and changing demographics too but he is more specific, pointing out how much larger and wealthier “Gen Y” (ages 23 to 32) is than “Gen X” (Millennials older than 32).
He also points out that a strong employment market is getting “Gen Yers” to finally move out of their parents’ basements and into homes.
SFR RENTAL MARKET AND BOON FOR INVESTORS
Mr. Pettee finally points out that Millennials and buyers in general still want single family residences (SFRs), as opposed to condos and apartments, and that this demand will increase markedly as they start families.
BUT, he points out that many Millennials will be content to simply rent SFRs as opposed to buy them. This coincidentally was corroborated in today’s WSJ with this article about the huge number of renters with six figure incomes.
There will clearly be huge opportunities for buyers looking to own SFRs solely for their investment potential.
WHAT SHOULD THOSE OF US IN REAL ESTATE AND LENDING DO WITH THIS INFO?
- Share this info with any potential buyers who have cold feet or concerns about a potential correction. This data should allay most of their concerns.
- Be ready to focus on the investor market. Investors may turn out to be one of our biggest market opportunities, as they will likely have a huge and ready market of potential “Gen Y” renters.
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