One of the many riddles facing the housing industry is why Millennials are spending too much on things that are not homes — like vacations or avocado toast. The logic goes that it must be their wasteful lifestyles, not, say, their $37,000 apiece share of the $1.45 trillion student debt load. Unless you’re Zillow’s chief economist, Svenja Gudell, who’s fucking had it, guys.
Gudell weighed in on August’s housing sales numbers, which have, on paper, hit equilibrium. Basically, the market indicates that there’s just enough houses to meet demand, making it neither a buyer’s nor a seller’s market. Except Gudell thinks that’s an illusion:
New home sales ended the summer on a very weak note, and it’s time we stopped sugarcoating the truth with this data — the simple fact is that we are severely under-producing housing in this country, relative both to basic demographics and currently high demand from buyers. Inventory is stuck at roughly mid-1990s levels, but the country has grown by more than 60 million people since then. Buying conditions, in theory, are great right now: Jobs and incomes are growing, and rock-bottom mortgage interest rates are helping keep financing costs low. What’s missing from the equation is a lack of homes actually available to buy at a price point that’s reasonable for most buyers, even with today’s bump in inventory.
In other words, Gudell thinks there’s more demand for houses of a certain price than there is supply. And she’s likely right. Simply put, whenever somebody bothers to look at whether millennials can afford houses in places they want to live, the answer is no. Millennials tend to want to live closer to cities, or at least with good access to cities and their amenities, and simply aren’t making as much as their parents did, economically speaking, with debt weighing them down and housing prices continuing to rise.
Meanwhile, developers in cities keep turning out luxury apartments, putting upward pressure on rents, meaning any money that might have gone to a down payment instead goes to just keeping an apartment. So, in other words, the demand is there, but unless developers start paying off student loans in exchange for mortgages, or start realizing that they’re robbing Peter to pay Paul’s rent, sooner or later they’re going to find themselves with a lot of expensive homes they need to sell, and nobody around to buy them. Meanwhile, some wahoo in the desert making container homes is about to be the next Bill Gates.
(via Housing Wire)