Chasing the American Dream

Desire for homeownership comes to terms with the ability to attain it

By Genevieve Smith

The NAHB has been sharing information since the beginning of the year pointing toward the full recovery of the home building industry. Now data from spring and summer sales is in and so far its been nothing but complementary to their position. To add to the good news, NAHB chief economist Robert Dietz sees this as the market just gaining momentum: “The market should continue to firm throughout the year, propelled by low mortgage interest rates and solid growth in employment,” he said in an NAHB newsletter in mid-July.

However, complicating this theory is more recent data, which shows mortgage rates are on the rise. Redfin published on July 28 that “Mortgage rates rose for the third week, averaging 3.48 percent for a 30-year, fixed-rate loan, up from 3.45 percent the week before.” As of a year ago, rates averaged 3.98, so YTD is still down, but the rising number warrants keeping an eye on if low rates are one of the main factors inspiring confidence in the market.

All that being said, the industry is in a great position and at least has better problems to address than a tanking economy. Instead, homebuilders are now faced with the problem of creating enough inventory for the apparent hordes of people looking to swoop up their own personal slice of the American dream.

The NAHB also shared this month that the inventory of new homes for sale was 244,000 in June, “which is only a 4.9-month supply at the current sales pace.” This increased demand means higher prices until land and labor shortage are conquered, and that isn’t good news; it could price out a large sector of Americans who want to buy homes.

To own a home has always been a quintessential part of the American dream. Not to put us all in a box, but to have a job, a home, 2.5 kids and a family dog are just about American as fireworks and sitcoms. Yes, the Chinese invented fireworks and there are many more different types of family than The Cleavers today… but I digress. For the sake of argument though, lets look at where that dream really began.

In the 50s, when the genesis of our middle class really began in the states, GIs coming home from war could readily afford a place to call their own. The median cost of a home was $188,900, adjusted for inflation from $7,354. The median price of a home in the U.S. as of June this year is $306,700. No wonder the Census Bureau reported in late July that “homeownership in the U.S. fell to a 51-year low this spring.” According to them, the share of Americans who own their homes was 62.9 percent, the lowest since 1965 and the second-straight quarterly decrease, down from 63.5 percent at the beginning of this year.

Some may be inclined to blame the deficit on lack of desire for homeownership, pointing to the differing lifestyles of recent generations, including those pesky millennials mentioned above. But the numbers would disagree. 81 percent of 18-to 29-year-olds want to buy a home, according to results of a recent poll that the NAHB released that gauged public sentiment on the value of homeownership and government programs that encourage homeownership and housing production.

The polling firm Morning Consult conducted the nationwide survey of more than 2,800 registered voters July 22-24. NAHB Chairman Ed Brady remarked that “the survey shows that most Americans believe that owning a home remains an integral part of the American Dream and that policymakers need to take active steps to encourage and protect homeownership.”

From all the data, it’s clear that the desire is there. According to the poll, 55 percent said the biggest obstacle to buying a home was finding a home at a price they can afford, followed by 50 percent who cited insufficient savings for a down payment, and 41 percent who reported difficulty getting approved for a home loan. So, whether or not someone buys a home seems to come down to ability to purchase, which has many factors, with purchasing power chief among them.

But as employment is on the rise, so is wage growth. According to the Society For Human Resource Management, salary budgets are expected to rise 3 percent in 2017, so increased wages could be half the battle in people realizing the dream of home ownership. The responsibility then falls to the home building industry to find ways to bring down the median price of homes as they build all these new homes to keep up with demand, opening up the doors to prospective buyers who will shortly be qualified and want to spend their hard-earned money on their piece of the American Dream.

Genevieve Smith is the Editor for Builder and Developer magazine. She may be reached at gen@penpubinc.com.

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