Dec 11, 2019

The great American housing engine slows

Animated illustration of a magnifying glass searching for a For Sale sign.

Illustration: Aïda Amer/Axios

Rising prices, changing demographics and low geographic mobility are shaking up the housing market and driving down the number of homes for sale in the U.S.

Why it matters: "It's a sign that the dynamism of the American economy is diminished," says Mark Zandi, chief economist of Moody's Analytics. Home sales drive a lot of economic activity, such as when new owners spend money on renovations and furnishings.

The number of homes for sale in 2020 will hit an all-time low, real estate company Redfin projects. Here's why:

  • Homeowners aren't buying new houses. In 2010, an owner's median tenure in their home was five years. Now, it's 10.
    • That tenure has risen even more in some markets. In Salt Lake City and Houston, for example, it went from 15 years to 23 years, per Redfin.
    • The rise is partially driven by older homeowners who are delaying retirement and moving to elder care, Daryl Fairweather, Redfin's chief economist, says.
  • There's an affordability crisis. Yes, mortgage rates are very low, so monthly payments have come down, but prices for homes have gone up much faster than incomes, says Fairweather. That's keeping potential first-time homebuyers from taking the plunge.
  • Millennials are waiting to buy homes due to sky-high student debt burdens. In 1981, the median age of all homebuyers was 31, and this year it was 47, Yahoo Finance's Zack Guzman notes.

The bottom line: Fewer homes on the market means Americans aren't moving as much anymore. As we've reported, the distinctly American trend of packing up and moving to follow dreams and new opportunities has quieted way down.

  • "People that are unemployed live in the rural or ex-urban areas, but they can't move" because there either aren't houses for sale or the ones that are available are too expensive, Zandi says.
  • The reduction in mobility "is a really big deal over the period of a decade or a generation," he says. "If jobs are open, but people can't take them, that's a hit to the economy and GDP growth."

Go deeper: For seniors, an intractable housing crisis

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