is that there are quite a few 20- and 30-somethings with cash and in rental homes waiting to buy
that demographic was locked out of real estate in the 2004-2006 time frame, and is now poised to buy
especially in the southern growth markets where LEN has most of its projects
place yer bets
So those 2M people are too good for renting?
Bottom line is, demand comes from money. Will those 2M people generate enough value in the economy and save enough of it to get them the dough to buy a house?
In the last few years, they didn't have to. Money was given to them for free. It will be different going forward, no matter how hard they try to re-inflate the bubble.
My perspective is from the twin cities, it costs between 50K to 100K for a 1/4 lot. My guess is those houses in Texas don't even have basements. Cities/Counties here charge between 25K and 40K for the city water and sewer. Also, permit fees run north of 7K on every new home. Lennar had a development where I live, and they originally wanted to sell homes for about 300K, and once they dropped to about 270K, they sold the land because they couldn't continue to build there and make enough money to make it worth their while. Trust me, many small home builders already went out of business, and as far as I know all of the large homebuilders are losing money at today's prices. Put 2 and 2 together, they will stop building homes very soon if they can't make enough money.........and banks will no longer float them capital (it's becoming too big of a risk for many financial institutions now).
The word on the street is once Obama takes office, there will be a major media campaign to put out the message that the bottom is in. I'm not a big fan of the Rep.'s or Dem.'s, it clouds your mind, but my best guess is once employment bottoms (probably early next summer), then we'll see a slow, but steady increase in credit and housing. The population of the US grows by about 2 million people per year, so there needs to be about 1.2 million new places for them to live, and right now we are around 500,000 for next year. A few years like that, and real demand will be created. I realize there are over 1 million foreclosures out there, but there are also more than 500K people that are in temporary living situations, and those houses will be filled in a couple of years. Once they go back to longer term living conditions, along with building at -700K per year, we will see a shortage 3 to 5 years from now.
Ok, right, with what cash do these 20-somethings have. Most have huge student loan debt from skyrocketing tution costs, car loans and credit card debt. Most are lucky if they even have a positive net worth and currently a job right now. Salaries have not increased at all. Still need the median home price at around 130k = 3 times median salary at 42k. Get in touch with reality.
"Still need the median home price at around 130k = 3 times median salary at 42k. Get in touch with reality."
Your figures are based on one salary, and I agree that a 2 bedroom townhouse should be 130K, for a single owner, but for two wage earners, according to your figures, single family houses should be at an average of 260K, which is fair for a two income household.
Where I live in Minnesota (twin cities), it cost about $200 more per month to own, than to rent. Which is about right, since you get back about $3000 per year in taxes if you have a mortgage (claiming interest on a loan). Plus, most renters are finding that their rents is going up $30 to $80 a month when they are renewing their leases.
And less than 10% have the FICO required to get a mortgage. Housing will CRUMBLE another 50%+ in Vegas and other still overpriced markets.
Renting is STILL half the cost of owning - it makes no sense to buy yet - wait till at least 2010, by then most of the Guatemalan trailer trash living in all these rentals will be deported after their landlords get foreclosed on.
I like your optimism but...........the next wave of home buyers will enter the market 2-3 years from now after prices fall 20-30% to even get close to the non-existent incomes that people have...hope they have a new fancy loan product by then.....and hope these new buyers have a job!!!
they aren't building any more land, but they aren't building buyers either