Overall indicators are showing that the construction industry is in a gradual comeback, and residential construction is no exception. But at the demand end of things, first time homebuyers aren’t rushing in now that the overall economy is better. What’s causing this?
Let’s look at generational factors. A recent article in the construction Dive based on a Wall Street Journal study indicated how profoundly generation Xers continue to be affected by the real estate crash in 2008. With many of them exiting home ownership for economic reasons after the crash and still unwilling to recommit it. Generation Xers, unlike bayboomers that preceded them, come up real short on the homeownership scale at only 58.5%, compared to the overall population average of 65.8%. So don’t expect them to contribute to the housing comeback for a while.
In the years immediately following the U.S. recession however, Generation X and the baby boomers were replaced by millennials as the biggest portion of the US workforce. According to recent statistics, from the U.S. Bureau of Labor, Millennials (those born between 1980 and 2000) now represent 35% of working Americans.
Millennials have been characterized as “late to leave home” and so far unwilling to commit “en masse” to homeownership but that could be changing. Time is ticking for the first millennials who wish to start a family, as they are now into their mid 30s. A recent poll by the huffington post states that 86% of them consider homeownership important.
That doesn’t automatically boost the market though. It seems all generations have a more cautious attitude towards home ownership since the recession. A recent study by Bank of America of 1000 people considering first time homeownership found that they aren’t ready jump into a first purchase unless it can fit their long-term needs. 75% of the likely to be looking for a home they can keep and grow into. Also, 69% of first time purchasers will wait for the right home. Today’s homebuyers aren’t interested in a cheaply made house they can flip 3 to 5 years down the road. Another sobering note: 56% don’t think they can even afford a home yet.
Yet economic conditions are better than they’ve been in the past 8 years. The U.S. government has decided it will raise interest rates only twice a year and not four times a year, with no significant rise in sight. This should reduce fears of being trapped by a sudden rate increase.
And then there is the tumbling number of starter homes on the market. It is hoped that this will pressure the construction industry to respond with more builds. These starter homes would have to provide excellent value for homebuyers though, as stated above. The fact that Construction material pricing has gone down year over year by 3.4%(notwithstanding a very recent bump), could help construction companies do just that.
We would also recommend you have a look at TRIFORCE® open joist characteristics and pricing, to see how they could help you make your offer more competitive. It’s our way of getting the housing market going strong again 🙂