We're in a "Bizarre Market"...Thoughts on a Recent Article
Realtor · Keystone Heights, FL · Member since 2015 · 340 posts · 118 votes
National Association of Realtors Chief Economist Lawrence Yun recently wrote an article stating that we're in a "Bizarre Market" in which he stated "With a strong economy and the lowest unemployment rate since 2000, more Americans are in the market to buy a home yet sales are stagnant. Existing home sales are down about 1 percent year over year." He went on to discuss how the average days on the market are only about 26 which is well under historical norms. I have personally seen SUB 1-week in both the Central VA and Omaha markets on some properties in the last several weeks.
His solution is new home construction in a variety of housing types to address the inventory shortage. While I think that certainly has merit, I was just wondering what everyone else was thinking of the current market, bizarre or otherwise, and what you feel is a good move to solve the problem. Is it a "problem" or is it a "new normal" for a while? What are your thoughts?
-Walt
Jay, I tend to think that millennials (and technically I am one, but only by a hair) are split down the middle. You have half of them that are absolutely crushing life, paying off debt, succeeding in businesses, etc. Then you have the other half that's perfectly content to sit in momma's basement until they're 27 and they feel that life somehow owes them something. I guess the question becomes, how many does it take to change the market dynamics and how many are there really.
if you guys think Millenials are bad, Gen Z goes: "Hold my craft beer and watch this"
I am a Gen Z and I remember when I got out of college, everyone was calling us the slacker generation. You younger people just watch the movie Reality Bites (starring Winona Ryder - long before Stranger Things). Young people are always clueless and wandering to find their way. Look at the hippies of the 60's or the flappers of the 20's. Nothing new here. The millenials will keep getting older and will settle down with kids and buy minivans. Then the millenials will start criticizing a younger generation. It is the cycle of life, now if you will excuse me I have a craft beer waiting.
@Scott Trench That's interesting that you've brought up the need for skilled labor. While traveling to Denver for work last summer, I heard on the news that there were more cranes up in Denver than any other metro in the US. They remarked that due to the push for STEM education over the years, fewer students were entering the trades, creating a shortage of labor to get all of these buildings up, resulting in construction delays. I had never correlated the two (and maybe it's more coincidence than correlation), but found that to be an interesting point of consideration. Of course, state/local constraints on new construction certainly don't help, but once something gets the greenlight, it would be nice for there to be a crew to get the thing up!
There is a ton of new construction going up in Oakland, a mix of rentals and for-sale. This new co-living development is particularly intriguing, as it addresses many of the "millenial"/hipster challenges of our area (more affordable, centrally located, modern amenities, no maintenance responsibilities). The company (Common) is certainly on to something.
@Scott Trench Addin on...
I'm an urban developer, and from a business perspective I would *love* fewer regulations. It's a giant albatross that limits (affordable, especially) housing development.
As a citizen, however, it's not so clear.
In CA, we have a regulation called CEQA - it gets in the way of any development activity and basically says (my words): "If you're going to make the environment worse for anyone by building this, you better figure out how not to ... or pay to mitigate it some way." Does this make building more difficult and expensive? Yeah. Do I hate it? Yes. Is it clear as a resident that I want to do away with it? I'm not so sure.
I attended an urban planning workshop last year that touched on many of the challenges contributing to housing lots of people. There's science and data and planning and coordination and alignment and political will and regulatory structure and financial viability ... and it needs to all come together.
My main observation at this point is that, while we can identify "regulation" changes in general terms as part of the solution, we need to be really careful to not minimize the challenge in identifying which regulations need to change and how. It's hard work to do what's right for everyone in the long term.
And yes to all the other items mentioned - increasing raw material costs (some homes I'm building now have an additional $15k in lumber costs compared to this time last year) and increasing skilled labor costs are obvious.
If anyone wants a detailed writeup on how tough it is to build new multifamily construction in California, this is about a year old and on reddit, but quite informative.
Seems like this kind of topic comes up often. As @Jay Hinrichs says .
It's the same news year after year from the National Association of Home Builders... what are the biggest building challenges? Labor and material costs: , , and now the .
It will get worse with tariff and trade impacts and the US government fixation with pissing off the . there is no question material prices have impacted the new home construction market. And dare I say that in my area at least the labor force that left in 2008-2009 because of economics left again in 2016-2017, creating a worse labor problem that persists now.
In many US cities, it seems like the housing market is on a similar path that the energy (oil, specifically) market experiences: boom and bust cycles. We just happen to be in the boom stage, and virtually no one on BP (maybe 1% of BP Nation) was in this business 10 years ago in the great bust cycle part of the program. I have a feeling there will be too much new building (over supply) in a few years, just based on history and human nature.
@Scott Trench and @Chris Martin you are on the right track when you cite labor shortages. You didn't mention the fact that for every 5 skilled tradesmen that are aging out of the industry only 1-2 are entering. As the "Millionaire Next Door" points out, these skilled trades can be quite lucrative and yet we keep pushing our young people in other directions (and something like 50% of them quit college in the first year or two). We (generic "we") snub blue collar trades (yet are ever so grateful for that sewer repair guy when the you know what comes bubbling up and will pay a ridiculous hourly wage to make it go away again.) I am doing some new construction and it is not uncommon for the trades to be 3-5 weeks out at any given time. You really have to plan and call ahead to keep your jobs from endless stalling. This is all a long way of saying that we need to get more creative with on the job training programs for the younger set mixing real life work (and paychecks) with appropriate schooling or the problem is just going to get worse.
@Teri Feeney Styers While I agree with some of your post, I disagree with the thought that I/we "snub blue collar trades". Why the hell do you think I posted? I am re-siding a complex in Greenville that my company owns and as field service manager almost all of my subcontracted workers are DR (Dominican Republic) immigrants. They work hard and know the meaning of "An Honest Day's Work For An Honest Day's Pay". All legal. All good.
In times like this, meaning your crew might get 'stolen' from you like in 2005-2007, you need allies. Your allies are people like my DR contractor who I've worked with (note: with not under) me for a decade. While my current project is only $80K or so (small), my task is to keep talented crew active... but more importantly communicate what I see as future work (or lack thereof) to my subs. I can usually tell them if we will see a dry spell. Likewise, I try to queue up work for them in down times (off season). While I control the decision, it isn't in a vacuum. Allies. That's what you need to form to survive a tough market like this.
@Chris Martin I think we are on the same side - I was using a collective "we" meaning the general populace. Parents, teachers, etc. still tend to steer young people away from the trades. "We" need a mind shift. I totally understand the value of these skilled people and yes, I work with the trades and work hard to establish long term relationships. And yes, keeping work in the pipelines is important to these relationships; not just my bottom line.