patrick.net

What is the average price of such a "large" house built new?

True: Builders aren't building starter homes because they are not profitable. Higher prices are needed.
False: Building more homes won't increase affordability. Building more homes increases supply. Higher supplies lead to lower prices.

Heraclitusstudent says

What is the average price of such a "large" house built new?

If you want to take the King... Toll Brothers is between 850K-900K for a median price home

Strategist says

False: Building more homes won't increase affordability. Building more homes increases supply. Higher supplies lead to lower prices.

We had the biggest build of new homes 2002-2006 and it did nothing for housing affordability what so ever

Logan Mohtashami says

We had the biggest build of new homes 2002-2006 and it did nothing for housing affordability what so ever

Because demand increased faster than supply.

Strategist says

Because demand increased faster than supply.

Fueled by the Fed, Mozilo and type characters.

Strategist says

Builders aren't building starter homes because they are not profitable.

Corrected:
Builders aren't building starter homes because they are not as profitable.

Strategist says

Because demand increased faster than supply.

We had good demographics from 1996-2007

But not that good, the fact that they kept building bigger and bigger homes post Great Recession shows the concern for profit margins they have.

This has been going on for 4 decades and a new home will never be cheaper than an existing home ( apple to apple)

I don't blame the builders at all.. look, they have more supply in this cycle than the previous but missing out on a lot sales, they had make that up somehow

indigenous says

Strategist says

Because demand increased faster than supply.

Fueled by the Fed, Mozilo and type characters.

True. Easy credit fueled a demand boom.

Logan Mohtashami says

Strategist says

Because demand increased faster than supply.

We had good demographics from 1996-2007

But not that good, the fact that they kept building bigger and bigger homes post Great Recession shows the concern for profit margins they have.

This has been going on for 4 decades and a new home will never be cheaper than an existing home ( apple to apple)

I don't blame the builders at all.. look, they have more supply in this cycle than the previous but missing out on a lot sales, they had make that up somehow

Building bigger homes over the decades reflects a rising standard of living in America. We are wealthier, we can afford bigger homes.

What would bring down the price of housing?

Deporting 11 million illegals. They don't live in caves.

Logan, if your point is that it won't bring down prices faster than other factors will increase prices, fine. If your point is that building large houses has no effect on house prices across the board, I don't get it.

Could there be over-investment in these bigger houses?

YesYNot says

Logan, if your point is that it won't bring down prices faster than other factors will increase prices

One of the things that I have tried to point out here is that median home price cooling for new homes isn't a bad thing because sales are so low still that the mix shift in sales data point of bigger homes and smaller homes can impact the median price

The problem is that people can't explain why new homes sales

- have missed new home sales estimate 3 years in a row
- why new home sales are still at recessionary levels
- why new home sales prices adjusting to inflation are at all time highs

It's simple, 4 decades of building bigger and bigger homes in a 4 decade push of having smaller and smaller family sizes has created a permanent inflationary factor, that the builders them selves don't want to fix, I don't blame them they can't make $$$ on smaller homes

indigenous says

Could there be over-investment in these bigger houses?

Not likely. There is an underinvestment of all home types. Since the crash the population has increased by more than 20 million people, but home building is at dangerously low levels. Home prices must, and will increase.

YesYNot says

What would bring down the price of housing?

For existing homes, you need a recession, a recession will create more supply and has been the only factor that has created 6 months plus annual months, in this case for housing, 2006, the first head year of the housing bust

YesYNot says

Deporting 11 million illegals. They don't live in caves.

Not a big factor for existing homes market

I have created a better demand curve thesis for years 2020-2024 and in doing that I have check and counter my own thesis as well and what might impact that demand curve.

So, the housing inflation thesis is the only thing I can see impacting demand at that point because the human supply factor will be a lot higher then

Logan Mohtashami says

housing inflation thesis is the only thing I can see impacting demand at that point because the human supply factor will be a lot higher then

What about how technology could influence the housing industry, or the demand moving because of telecommuting?

How does a recession create more supply? 11 million are 0.3% of the population. Does a recession cause so much doubling up that it has a bigger impact than 0.3% give or take reduction in demand?

Logan Mohtashami says

YesYNot says

Deporting 11 million illegals. They don't live in caves.

Not a big factor for existing homes market

That would only leave about 1 million houses empty.

YesYNot says

How does a recession create more supply?

In housing now, a job loss recession would create a distress property, post 1996 since the inflation price gap deviated from historical trends, we have never had 6 months annual month of supply for existing homes outside 2006-2011. Housing bust and recession combined.

So, it's very long in this cycle now and still no 6 months of supply because we are not a natural 6 month inventory country for existing homes, new homes on the other hand I believe high water mark in this cycle has been 5.8 months, but the builders have more control over that process

zzyzzx says

That would only leave about 1 million houses empty.

That would assume illegal immigrants own homes

YesYNot says

. Does a recession cause so much doubling up that it has a bigger impact than 0.3% give or take reduction in demand?

Here is the inventory chain as you can see you can see the housing bust factor in the data.

However, we no longer have exotic loans in the system, these home owners will only sell if they're moving up or down... a job loss recession would create more supply but nothing like we saw in the bubble bust

"high employment"

I think this is largely a fiction, considering we have the lowest participation rate of employment since the 70's, I've seen something like 62.7%. These numbers are highly fudged as people who are no longer looking for work are not counted among the unemployed. Also, many jobs today are not the secure ones of many years ago--many are temp situations that don't lend themselves to a feeling of security on the part of the "employed". In conversations during the past couple of weeks friends have told me of young and even not so young relatives who have had umpteen jobs in five years or so, not exactly conducive to long-term planning.

Logan Mohtashami says

That would assume illegal immigrants own homes

I know they rent, but that's still potentially about a million empty rental homes.

P N Dr Lo R says

"high employment"

I think this is largely a fiction. These numbers are highly fudged as people who are no longer looking for work are not counted among the unemployed.

154 million Americans working, 43 year low in unemployment claims and the 2 months ago we had the highest job opening print ever recorded in human history at 5,845,000

After 8 years in this cycle if you're not working like most Americans, it's you... certainly not anyone who is looking to buy a home

zzyzzx says

I know they rent, but that's still potentially about a million empty rental homes.

Not sure that thesis works with what I am talking about. roughly 11-12 million renting people in the start of the century and now there is almost 17-18 million now.

I don't see deportation being a housing supply factor for ownership

Logan Mohtashami says

We had the biggest build of new homes 2002-2006 and it did nothing for housing affordability what so ever

This is simply not true. Home prices collapsed below 100K in states with large overbuilding, like Florida.
The building was not evenly spread. There was never overbuilding in California.
Now the population caught up with the oversupply of 2006.

Logan Mohtashami says

If you want to take the King... Toll Brothers is between 850K-900K for a median price home

3-2 sell for $1.5 in many places in California.
This clearly shows housing demand result in prices being bid up way higher than costs.

Look at this way

In a few years demographics for ownership will be positive, this is the light cycle from 2008-2019

The question is, do the builders keep on building bigger and bigger homes into that strong demographics where median sq ft. is then 2,700- 3,100

Or do they start pushing and I mean really pushing smaller sized homes for the young demographic that will be more of a proper age

Ironman says

So, why don't you move to Florida so you can buy your own house?

Maybe I don't want to be underwater in 15yrs?

You're going to have a lot renters right in that sweet age spot ages 28-42 come years 2020-2024 we have been renting for some time

Logan Mohtashami says

The question is, do the builders keep on building bigger and bigger homes

As long as the market is supply constrained, they should build only big homes. Lots of them. Housing is fungible and rich people buying new houses are not competing for 1600 sqft 3-2s. So it benefits everyone.

Logan Mohtashami says

Or do they start pushing and I mean really pushing smaller sized homes for the young demographic that will be more of a proper age

There is a lot of demand for cheaper housing, and if they can make money on basic smaller houses sold cheaper, why would no one address this demand. The real question remains, why in a capitalist system, is an entire industry not answering a demand, and this year after year for 3, 5, 8 yrs?

Logan Mohtashami says

You're going to have a lot renters right in that sweet age spot ages 28-42 come years 2020-2024 we have been renting for some time

Considering the price of renting, these people won't be able to save much for a down payment. This just postpones the current problem.

You can't extort an entire generation by refusing to build. The current system is a con job based on nothing.

Heraclitusstudent says

Considering the price of renting, these people won't be able to save much for a down payment.

This issue still doesn't get enough attention

LTI factor of rent inflation in areas where you have a high population density factor

(Tiffany Effect)

Logan Mohtashami says

This issue still doesn't get enough attention

LTI factor of rent inflation in areas where you have a high population density factor

Same cause. Not enough supply.

Heraclitusstudent says

Same cause. Not enough supply.

Rate of rental growth supply has peaked

We have permanent inflation on both fronts and all that can be done is to cool it down, ( Outside) a recession, this inflation will stick...

Until the builders make a push to build smaller homes national on a long term basis .. not just a few builders here or there

Logan Mohtashami says

154 million Americans working, 43 year low in unemployment claims

That may be, but are they working in jobs in which they'll still be employed five or ten years from now unless they want to quit, which have great benefits and can ensure 40 hours a week and two weeks of vacation after the first year?

P N Dr Lo R says

That may be, but are they working in jobs in which they'll still be employed five or ten years from now

Not only yes, but in 5-10 years you will see some more older Americans leave the work force as they simply become to old to work