Yogi Berra once said, “The future ain’t what it used to be.” I’m pretty sure he was talking about the housing market.
Just five years ago, we were talking about a “soft landing” for housing and how home prices never go down. Now it seems we’re constantly looking for a recovery that’s coming “next year.”
The truth is we probably need to come to grips with a new reality. Housing and the attitudes toward it have drastically changed. As I’ve written many times over the past few years, I think we’re in the middle of a seismic shift.
The old assumption that buying a house is “what you do” is gone. I see it constantly in my own life, when I talk to my friends and the parents of my 6-year-old daughter’s classmates. They want to trade that house in the far-flung suburbs for something closer to the city and in a better school district, whether it be a condo, a townhome or a rental. Higher gas prices, plunging property values and an uncertain job market has everyone re-evaluating what’s important.
It’s one of many reasons that I think many people are still being too optimistic about the new single-family construction market, although most are tempering their expectations lately in the wake of the tax credit hangover.
That’s the bad news – the really bad news if you’re a production builder out in the sticks.
The good news is that people have to live somewhere. Most demographers agree we need about 1 million new housing units every year just to handle the formation of new households. (This includes multifamily and single-family homes.) When we get the 2010 Census numbers, we’ll have an even better idea how those numbers shape up.
Right now, that’s not happening as the economy pushes people to move in with their children or their parents or to find additional roommates. Government numbers show about 300,000 homes leave inventory every year, so we’re barely breaking even at this point on the new construction side.
For remodelers, the question is if you are positioned to take advantage of the new reality. Rental housing is older, on average, than owner-occupied homes. It’s a great opportunity for remodelers as more people leave (or are forced out) of ownership.
Yes, it’s different. There aren’t a lot of $150,000 kitchens, but there are homes and multifamily buildings that need updated kitchens, revamped bathrooms and upgraded windows. hot water heaters, insulation and HVAC systems.
There are still a lot of reasons to be optimistic about remodeling, as you can see in our 2011 market forecast article on p. 26, but there are going to be challenges, too.
The remodelers that not only survive, but thrive in this new reality are going to be the ones that adjust and give up the idea that the market of the first half of the decade is ever coming back.
Housing and the attitudes toward it have drastically changed.