A basic lesson in economics teaches that levels of supply and demand give a clear indication of what prices consumers can expect before even looking at a price tag. When the desire to own a product is high, people are willing to pay a higher price-—but our Demand Index (and closings in many markets across the country) indicates that there’s a limit.
The American dream of owning a home is still very much alive—results of Gallup’s Economy and Personal Finance Survey revealed that seven in 10 non-homeowning adults aged 18 to 29 hope to own a home in the next 10 years. More significantly, 35 percent to 40 percent of non-homeowning adults of any age group who make less than $50,000 annually also hope to buy a home in the future.
The rising cost of land, however—even in markets where lot supply isn’t as tight—directly affects prices builders charge for a new home. Yes, basic economics, but for the post-recession, non-homeowning American, the desire to own a home is no match to the deep-seated fear of losing everything—a possibility the recession proved to exist. Taking out a loan to buy something out of means seems more like Russian roulette than a mortgage now.
Read the results of January's Demand Index and additional commentary on Builder >>