I recently saw a news video titled "Millennial homeowners shift toward renovating instead of selling". There seems to be multiple news articles about this, from all different sources. (May 2023) A few highlights: "Millennial homeowners, rather than sell their starter homes and move, are staying put and spending their money on expansions and improvements," "It's likely cheaper for them to renovate than to buy a bigger, more expensive home at the higher rate," It appears that homeowners in the 26-41 age group are unable to afford "moving up", and rather are stuck in the starter homes they are already in. This is probably due to the chronic housing shortages in many areas driving home prices up. I notice many of those on the Left seem focused on "demand-side" solutions, like trying to increase wages of lower income groups, or having the government throw lots of money at the problem. But what about "supply-side" solutions? Why is there so little focus on what's making housing so expensive in the first place? This includes examining the country's immigration policies and looking at overcrowding and local population growth over time.
Its really quite simple: You have a 1 acre lot. You can build 1 structure on it, per zoning and platting requirements. That's leaving aside any HOA, just purely city requirements. Do you as a developer selling real estate for max profit build: a) a structure that equates to 200k value; or b) a structure that equates to 300k value; or c) a structure that equates to 400k value?
The problem is that there are no affordable houses, and by staying put these home owners are contributing to the lack of housing. Everyone is staying put. And that's the problem. And of course no new homes are being built. One has to wonder how that's affecting the job market because people aren't moving to where the jobs are. Good jobs, better jobs? No one is moving up the career ladder. And we wonder why the income gap is getting bigger?
I have read in news articles that one reason why people are not moving - why everyone is "stuck" - is because they locked in good interest rates (like around 3%) on their mortgages for their homes, and since then high levels of inflation have happened. If they were to sell their home and try to take out a loan to buy another home, they would never be able to get rates as good as they have.
corporations, many from other States and even countries are buying up property, and they do not care about the locals, all about profit I am all for programs that help local people rent homes affordably, if they join the program, they need to rent to people at an affordable rate though
Well, you can't just blame greedy rich people or capitalism. Government policies had a big role in shaping the present situation. (And the effects of many of these policies cannot easily be undone and are long-term) I'm particularly thinking of immigration leading to high levels of population growth concentrated into already overcrowded city areas. Any time a shortage is created, that is oftentimes the kindling for speculation, hoarding, and speculative buyers trying to take advantage of the situation. It's really hard to hoard some commodity in the market and drive up prices when a scarcity of that commodity does not really exist in the first place. In my personal view, "greed from investors" is almost kind of secondary to the real underlying problem. Any time there is a scarcity of something, it will drive prices up. There is not enough for every person who is trying to get it, so desperate people will bid the prices up. Many of these areas have a lack of additional land space for building on, so that is more than half the problem. But it's also true that it's more expensive for the economy to build new houses. If there is a shortage of affordable housing that is driving up prices, building new houses may help prevent the home prices from rising beyond a certain level but it will NOT prevent prices from rising. In a free market, prices have to first rise to reach a certain threshold before it justifies the cost of building new homes. So the building of new homes does not completely relieve the shortage, since the price of the previous old homes was lower before the shortage. But there are other government policies as well that shaped this situation. Like for example holding down interest rates for too long in the past and expansion of the money supply creating inflation which then is driving interest rates higher, causing homeowners with mortgages to be stuck.
Renovating starter homes is certainly going to make starter homes more expensive. People buying homes to rent out for profit is also making homes more expensive.
Yes. A lot of those new homebuyers just starting out are having to move into newly constructed homes. But that is much more expensive, many of them cannot afford or will struggle to afford that. And most of these new homes are squeezed into a very small area or have tiny lot spaces with virtually no yard, trying to minimize cost, since buying a new home is already more expensive and most of these new homebuyers can barely afford it.
Well, when a shortage exists, people looking to buy homes do not have other options, so investors can do that. Investors wouldn't be trying to buy up all those scarce remaining homes up for sale if they were not scarce in the first place (relative to all the people wanting to live in those homes).
There is a shortage partially because people buy up homes to rent. Not just large companies, but boomers and older gen x folks who buy who buy 3 or 4 homes to rent out for profit. Profit is the root of all evil. The boomers are dying off, the shortage won't last forever.
I do not disagree, much government policy could do to stop this.. but they wont for example... outsourcing all our information jobs overseas is a national security risk, but will they put a stop to it? any company dealing with communications should not be allowed to outsource - be it phones, cars, homes, other smart things, etc.... India could shut us down with the push of a button if we keep outsourcing all these jobs to India
I was not so much saying that government could do something to stop this, but rather it is what government has done in the past that has caused this. The economy is kind of complicated. Every decision can have unintended and unforeseen complex consequences. But one thing I would say government could do is try to implement a policy of trying to redistribute some of the better job opportunities into lower cost areas. Perhaps even doing public infrastructure investments to build some new cities, like the type of big cities in old times (New York, Seattle, San Francisco, etc). People want to live in these type of cities but they are not building any new cities like this.
There are a lot of hidden costs in selling your house and buying another. Probably enough hidden costs to completely renovate your existing home from top to bottom.
That may or may not be true, but I think it completely sidesteps the issue I was trying to put the focus on. The fact is, people were doing something before, and now they are not doing it. So there has been an outside external factor resulting in a change.
They don't want supply-side solutions because most of the leftist politicians most politicians in general don't want anybody living next to them especially not riff Raff like millennials. And so they don't let them build anywhere near their neighborhoods. At least that's how it works in places like California.
In the old days, like the early 1900s, rich and poor neighborhoods were very close to each other. You could walk just 2 or 3 blocks and go from a rich neighborhood to a poor neighborhood. But that was when most people did not have cars (particularly poor people), and when the entire society in many areas was white (more ethnically homogenous). And society was more religious back then and crime such as petty theft and violent attacks on random people were lower than they became later, beginning in about the late 1960s. You can easily see how close rich and poor neighborhoods were to each other if you look at the layout of old sections of cities and look at surviving houses.
But if you don't renovate them, then they become rent til they fall down houses with no repairs in an increasingly slum like area. That is part of the reason we have so much urban sprawl---why fix up when you can build new thinking. Anyway, I turn 28 this year and unless work takes me to another city, I see no reason not to stay in my current house until I am dead.
That may be a problem in some areas, but is not a problem in areas that have housing shortages. Whether cities are experiencing chronic housing shortages is very much a regional phenomena in the U.S. Both the Northeast coastal region and the West Coast region have housing shortages, the areas around the big cities in Texas a little bit now as well. Meanwhile there are some (economically depressed) cities in the Rust Belt region and Mississippi River region that have a substantial number of abandoned homes.
