That’s one explanation
That Statista chart is from May 10, 2022. A followup from Oct 18, 2023 reports the market has cooled somewhat since last year. Nevertheless:
While house prices have continuously grown in recent years, incomes have not followed at the same pace. That means that for aspiring homeowners, purchasing a home has become increasingly unaffordable. In a survey among people actively looking to buy a home, one in three millennials cited the high house prices as the main barrier to homeownership. Meanwhile, inflation is on the rise and has forced the Federal Reserve to introduce a gradual increase in interest rates, leading to a double increase in the cost of borrowing. As a result, homebuyer sentiment plummeted, Americans across all age groups agreeing that the current time was not a good time to buy a home.
Home ownership is still one of the main ways Americans build wealth. If I were Gen Z, I’d be pissed too.
The Redfin chart above is also from summer 2022. But rents are still near record highs today even as pressures have subsided slightly:
The rental market has cooled in part because there’s a lot of new inventory, which means landlords are grappling with rising vacancies and have less leverage to raise rents. That’s the reverse of what’s happening in the for-sale housing market, where prices are rising due to an inventory shortage. Listings in the for-sale market have plunged because surging mortgage rates have prompted many homeowners to stay put, as moving would mean trading in their low rate for a much higher one.
Is there a housing supply problem? That’s the word on the street. But institutional investors looking to squeeze more profit from the housing market are another factor:
Between Invitation Homes, Blackstone BX +1.7%, and the major groups that are buying single-family homes, 1 in 3 houses in Texas were bought by a PE firm last year and Wall Street owns 1.2 million homes across the country. With that type of buying power in any market center, the shortage of homes is not just a product of supply and demand. These investors are looking for certain types of homes and taking inventory away from middle class Americans or first-time home buyers – the average buy box is a 1,400-2,300sqft., 3- or 4-bedroom single family home. Although this doesn’t affect high target markets like San Francisco, New York or Los Angeles, Americans are no longer able to buy a house in the submarkets where the average purchase price is $350-450k. When there are 1.2 million homes that are owned by Wall Street in today’s market center, institutional investors ultimately don’t care about the price of the home – they’re just trying to make yield on the rents because they can afford to pay cash for the homes. They have no intention of releasing these homes into the market center, which is adding to the housing shortage and creates a bigger problem. We can’t build our way out of the shortage of inventory.
Looking at housing in our town one Sunday, I spotted three houses on one street bought the same day by the same real estate group out of Boca Raton. They are now rentals. Yes, it’s a factor.
The Threads user at the top observes:
People don’t look to the thing that has gotten better for them (like more options for jobs.) They look to the things that have gotten worse for them, and 30% more expensive food and 50% more expensive houses over the course of 3 years is a huge shock and the only way out of that is through.
Financial analysis does not reduce individual angst. If you’ve seen $5 and $6 boxes of breakfast cereal in stores in the last couple of years, you know what he’s talking about. People cannot eat GDP.