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Date: September 17, 2018
Category: Real Estate

In 3 Points: The Haves and Have-Nots of Homeownership

Homeownership, part of the the American Dream. At least that was the thought that drove homeownership rates to unsustainable levels before the Great Recession. Now, 10 years after the housing market’s collapse, certain demographic groups like Millennials are hesitant to relive that dream (or nightmare).

1. Building remains depressed in a strong economy

The conditions could not be more favorable: low unemployment, high growth, and consumer confidence hitting record highs. Yet, where are all of the new homes? The National Association of Realtors reported that entry-level homes for first-time homebuyers are hard to come by.1 But if current owners aren’t parting with them, shouldn’t builders be stepping in? Especially since more first-time home-buying candidates are finally back to work.

Yet, what better gauge of housing demand than those responsible for their construction? Builders may be just as leery as those looking to take the leap into homeownership. Recent graduates may have jobs, but they also have large student loans. Young adults may be climbing the corporate ladder, but they tend to be nomadic in their quest for professional success. And current entry-level homeowners may be hesitant to take the leap into a “forever” home that comes with a larger mortgage and higher taxes. It has led to tepid new home starts despite a strong economy.


2. Bifurcation of homeownership

Those with expendable capital are leveraging it to buy luxury homes. Toll Brothers, America’s top luxury home builder, recently announced an eye-popping earnings report that underscored the luxury market’s strength: 27 percent higher revenues and 18 percent higher home deliveries achieving a much higher average sales price compared to a year ago.2


3. Making sense of a mixed-messages housing market

A crucial point: we aren’t seeing numbers like that for affordable housing. Where is the disconnect? There are a lot of theories, but here is one for Millennials: they are starting off in a deep financial hole. Back in 2006, Millennials were staring at roughly $480 million in student loan debt. Today, that number has climbed $1.53 billion.3 Saving for a down payment and taking the financial risk of homeownership may not be worth it – especially for those with vivid memories of the Great Recession. And if the demand isn’t there, builders may be less likely to increase available supply.


1 National Association of Realtors. First-time Buyers Stifled by Low Supply, Affordability: 2017 Buyer and Seller Survey. 10/30/17.

2 Toll Brothers. Toll Brothers Reports FY 2018 3rd Qtr and 9 Month Results. 8/21/18.

3 The Federal Reserve. Student Loans Owned and Securitized, Outstanding. Not Seasonally Adjusted. 1/1/06-4/1/18.
Resource Securities LLC, Member FINRA/SIPC.
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