What in the World is Going on with the United States Housing Market?
U.S. new-home sales rebounded sharply in March to the highest since 2006. Watch or read below to hear Mark Vitner, senior economist at Wells Fargo, speak about the causes and long term impacts of the U.S. housing demands.
Host: I’m curious, Mark, when you look at some of the data that we’ve been getting out of the housing market, particularly in light of the credit crisis and the economic recession here, how resilient. Can you talk a little bit more about the resiliency of that market and whether you see a persistent.
Vitner: Well, really, when you think about what’s happened with housing and COVID. COVID increase the demand for housing. People spent more time indoors, they are spending more time indoors. They wanted more space. So a lot of people that were renting found that they needed to buy something. And and so even before the economy began to come back, we began to see the demand for housing pick up in a really big way. But on the supply side, folks that might have thought about selling their home were reluctant to do so because most homeowners are a little bit older. They’re more susceptible to COVID and they didn’t want to have people coming in their house and put their houses on the market. And they also found that in the past, they may have thought they had too much space. That was that they were spending so much time indoors, they needed more space. So they were really less interested in selling. So we’ve really had this incredible supply demand imbalance that’s led to a dramatic increase in home prices.
Host: Supply demand imbalance is really hitting sales of existing homes, which actually, of course, fell in March because this is not enough to buy. But if you are buying them while you’re bidding much higher prices, the maps is asking. But new home sales, how at the moment are builders managing to keep up with demand? Why did we see such an incredible jump for the month?
Vitner: Well, we saw a big, big jump in March because we actually saw a week ago. And we had the housing starts numbers, housing completions increased in March. There were a lot of we had bad weather in the South during February. And so that put builders a little bit behind. We had a surge of completions and so builders had a little bit more product to sell. And if you look at it, home sales by region. New home sales rose 40% in the South. And they rose 30% in the Midwest. And those were the parts of the country that were adversely impacted by the extreme weather we had in February. But but even given the bounce back that we’ve seen, demand is so strong that we could builders could sell virtually anything that they could build right now. And many of them are having to limit their sales. When they open up a new community, they’re limiting the sales to the three or four homes a month because they don’t want to sell a home. And then find out that lumber prices jump up another 30% or 40% and not be able to deliver it for the price they sold.
Host: Wow I’m curious too Mark, how much are the demographic changes right now going on in our society with the course, you have the millennials sort of reaching an age where a lot of folks tend to buy homes and even at the lower end of the spectrum with the next generation, they’re now coming into adulthood. How much of that is affecting the market?
Vitner: That’s that’s a big part of it. And that really gets into the supply demand imbalance, because the baby boomers, they’re the ones that are sitting in a lot of these existing homes. And you would have thought that they’d be downsizing, maybe moving into a condo, moving into a smaller home, or maybe relocating down to Florida or Arizona. But a lot of them are just staying put. And so we’ve got all these millennials, this rush of millennials that are having babies and getting married and trying to buy their first house. And there just aren’t that many Sellers. And so that’s led to this dramatic increase in home prices. The other thing that we’re seeing is a migration away from some of the dense, globally connected cities like New York, San Francisco and Los Angeles. And a lot of those folks are moving to the interior of the country.
They’re moving to places like Salt Lake City and homes in Salt Lake City or stay on the market for only about six days. And most homes are selling well above the asking price. It’s one of the hottest housing markets in the country. And you’re seeing that in other parts of the country. In the south, you’ve got a lot of folks that are moving out of New York, that are moving to Miami. They’re moving to Tampa, Atlanta, Charlotte, Nashville. And all of those cities have seen home prices come up dramatically because folks that are moving from New York, the home prices and all those markets look like a bargain to them. But for folks who live in those cities, you’re suddenly seeing that home prices are rising dramatically.
Host: What about the New York homes that are left behind, the people snapping them up as people exit and want to go to different parts of the country? What does it look like for existing? And dare I say, are there any new homes being built in manhattan? I don’t know. But like for those areas you mentioned, L.A., new York, what happens there? Well, they’re not building any single family homes in New York City or at least in Manhattan. But what’s happening in these large cities? Most of the folks that are leaving Manhattan are not going too far. They’re going to the suburbs and the suburbs of New York. The demand for housing is very strong in Manhattan. We’ve seen that apartments vacated earlier on in the pandemic, a lot of the folks that are coming back into the apartments. But when you look at the co-op market, we’ve seen some investors come into the co-op market and some folks are looking to rent them out or to possibly turn them into short term rentals with Airbnb or vrbo. And and so we have seen a little bit of that. But it’s certainly the for sale housing market in Manhattan has weakened quite a bit this weekend in Los Angeles, in San Francisco, but in Vallejo, which is just outside of San Francisco and East bay, that’s one of the hottest housing markets in the country, according to the realtors report that was out yesterday.
*Bloomberg contributed to this content
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