The stock market is hitting new heights so far in 2014. Unemployment is not great, but at 6.3% it is the lowest since 2008 . The economy should be doing well. But Housing and the vast amount of building products and household goods it pulls along are not doing so well. The news media is just starting to talk about all this, but they are not sure what is wrong with Housing.
At first, some thought it was the terrible weather throughout much of the nation this past several months. But now its warmer, (watch out Al Gore for that climate change) and Housing, especially new Housing, is still slow. Some people say that interest rates on mortgages are up and that that is the issue. Although mortgage rates are up from the bottom they are still quite low by historic standards at just over 4% for a 30 year loan. One article about Warren Buffet’s real estate brokerage firm, mentioned that the lack of first time buyers, who usually make up over 40% of buyers but is now under 30%, is the issue. Bingo!
Having been around construction and building materials for way too long, that is the real problem. But to me it is not a Housing problem. It is a major issue with the economy problem. And I will try to explain why.
In endless conversations with my friends in Florida or Chicago, one theme keeps coming up. These are people who are either at the peak or end of their working careers and who brought their first home, like me, in their early 20’s. The reoccurring theme is that my/this generation is still substantially supporting their children and/or grandchildren. I do not mean a cell phone bill or even medical insurance. I mean monthly or quarterly or annual large chucks of cash to keep their children afloat. If friends have three or more children, one or two are still on their “payroll”. It is very rare that one of my friends is not helping at least one child survive. So even if these parents help with a nice down payment on a first time house, how are these young people going to afford it? The average price of a new house today is back to the pre housing crisis level of close to $300,000! Even with a big downpayment, how can young people who are struggling as it is, buy and maintain a house?
Young people now graduate college or with advanced degrees with $50,000 or more of student loans that they must start paying on immediately. This is about the same amount most of my group owed on their first home mortgage!
What value does this generation get for their college and advanced degrees? Often not enough salary to pay back their student loans and live, let alone try to buy that first house.
And if these young people are having trouble buying a first home, how will they ever be able to buy up all the retirement and second homes that are owned by my generation in Florida, Arizona or Vegas?
It is a major problem, but it is not a Housing problem. I believe it is a major long term problem for our economy that our so-called leaders in Washington are ignoring like everything else that is unpleasant. So, hopefully, the media will correctly identify the real Housing problem, and soon, so that it starts getting the attention that it so desperately needs.
bradszootales 
Talk about opening up a can of worms! This blog opens up several topics, all worthy of multiple blogs, if not books, of their own. You are correct, sir, housing problems are just the tip of the iceberg. The intersection of politics, economics and human behavior/expectations is endlessly fascinating to me. Thanks for digging in and sharing your observations!
Although this may not have anything to do with the housing market, “this generation” is not only supporting their children and grandchildren (I am one) we are supporting and caring for our aging and dying parents (I am one.) Plus, after the last recession/depression, which everyone said would never happen again, I think all generations are leery of spending money. My two cents, for what it is worth 🙂
Great blog! I wonder what the solution could be? We were happy with small houses back in the 60s, no air-conditioning, one land-line telephone, and with a car that we kept until it was too expensive to repair. Maybe some return to simpler ways or leaving within our means on less than the present standard of living would be helpful. I do appreciate how thought-provoking your blogs are. Thank you for your insights.
[…] The housing market just can’t seem to get its legs. Perhaps at the root of the matter is that many think that student loans are a public good. We should help make college affordable, correct? Except that John Burns released a report suggesting that student loans will cost the real estate industry 414,000 home sales! Young people are so indebted they can’t afford to buy new homes. Collateral damage? For more on this point I refer you to the Brad James Blog, Bradszootales https://bradszootales.com/2014/06/01/the-housing-problem/ […]