Life Is Not Back To Normal

As you can see from the chart below, NYC and Los Angeles are the least affordable cities. When people from those cities look at houses in Austin and Phoenix, they look cheap in comparison. Interestingly, the forecast calls for all cities to become less affordable in the next year. The winners are the homeowners in these cities. Some critics wonder who baby boomers are going to sell their houses to as they age. That’s the reverse of reality since there is a housing shortage. Boomers are having no problem selling their houses (not that they are doing this at scale).

Due to rising incomes and low-interest rates, buying a home is still largely affordable. However, we still need more houses built. It’s a very stressful situation to buy a house since there are usually multiple offers above the asking price. This is causing many people to pull back from buying. Plus, there is less of a need to leave the city (where people are more likely to rent) since the pandemic is expected to be over within a few months.

As you can see from the chart below, the percentage of consumers with plans to buy a house fell by the most ever in May. That being said, this is a volatile reading. It’s only being highlighted because it confirms the anecdotal evidence of consumers not liking higher prices and the lack of supply. Don’t read too much into this survey. This isn’t the end of the strong housing market. The two ways to end the trend are for rates to spike and for the labor market to worsen (for the upper-middle class).

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Disclaimer: The content in this article is for general informational and entertainment purposes only and should not be construed as financial advice. You agree that any decision you make will be ...

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