Just when we thought we were out, it pulls us back in. It just doesn’t seem fair, as things are finally normalizing after the last housing crisis which had its basis in a supply that was too plentiful, another housing crisis looms and is brought on by rising prices due to available homes being too scarce.
As Business Insider reports, there are a few main ideas, according to Jeff Kaminski, CFO of KB Home, that sum up what's going on in today’s housing market. The first of which is a severe decline in the amount of first-time homebuyers. In 2008 and 2009, KB Homes saw about 60 to 70 percent of their buyers as first-time buyers. Today, less than 50 percent are first-time buyers. According to Kaminski, the biggest reason for this is because of credit. Whether for psychological or financial reasons, many would-be homeowners have decided not to burden themselves with the debt associated with buying a home.
The second main idea Kaminski touches on is that the price-point for a first time homebuyer has risen by over $100,000, and wages have not kept up. A major factor for this increase in prices for homes is because of the severe lack of them.
The fact that many Americans are moving from the suburbs to the cities in search of sub-markets that are more desirable and of a higher income is also playing a role in the new housing crisis. As people leave the suburbs (even though there is still a larger number moving to the suburbs, cities are seeing a greater influx than before) suppliers are having a tough time keeping up with demand in urban centers.
KB Home itself has decided to place a heavy emphasis on spending more on pricier developments in urban areas and slow their building in some of California’s more rural areas.
There is some good news here, as well, and it comes in the form of an improving labor market. As the labor market continues to improve, fewer people will feel the need to head to the city in search of jobs. With fewer people trying to find housing in areas where it is difficult to build new units and, instead, remain in more rural areas, the issue of supply should be easier to solve.