The Role of New Home Builders in the Housing Bubble
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While there are many factors that explained the “housing bubble”, one culprit is the “new home” industry itself, which stopped building “affordable” homes..
· Nationally, in the first quarter of 2005, 31,000 new homes priced under $125,000 were sold. In the first quarter of 2006, that number had declined to 18,000 homes, and by fourth quarter 2007 that number was down to 8,000.
· The number of new homes sold in the $125k-$249,999 range declined from 34,000 in first quarter 2005 to 26,000 in first quarter 2006, declining to only 14,000 by fourth quarter 2007.
· And for the $150k-$199,999 range, sales fell from 66,000 in first quarter 2005 to 57,000 in first quarter 2006, before plummeting to 33,000 by fourth quarter 2007.
(In other words, this was not a case of raising the prices of a house that could have sold for under $125k to over $125k – had that been the case, there would not have been a decline in sales of houses in the $125k to $249,999 range during the same period.)
Builders had simply stopped building lower priced homes, thereby increasing demand for (and the prices of) lower priced existing homes.
Overall, the sale of new houses between first quarter 2005 and fourth quarter 2007 declined from 328,000 to 146,000, with 72% of that decline from houses selling for less that $200k.
Builders had pretty much the same mindset as Detroit – just as US auto manufacturers concentrated their efforts on gas guzzling SUVs rather than less expensive, more efficient smaller cars, so too did builders put most of their efforts into more expnsive new houses while nearly ignoring the demand for lower priced new houses.
Quarterly new home sales nationally (thousands) Total To 125k 125k to 149k 150k-200k ‘05 1stQ 328 31 34 66 ‘05 2ndQ 351 31 32 73 ‘05 3rdQ 326 28 33 67 ‘05 4thQ 277 21 30 47 ‘06 1stQ 285 18 26 57 ‘06 2ndQ 300 19 29 60 ‘06 3rdQ 250 15 26 55 ‘06 4thQ 216 15 20 41 ‘07 1stQ 213 10 17 42 ‘07 2ndQ 235 12 21 52 ‘07 3rdQ 181 9 18 37 ‘07 4thQ 146 8 14 33
Source: US Census Bureau (pdf file)
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This is something that began with Reagan.
It's so infuriating. We abandon the most economically vulnerable amongst us to the tender mercies of the apartment industry and never allow them a chance to stabilize their housing cost. Our idea of affordable housing is to build fairly high end housing, and then subsidize a chunk of it's value so that low income families can afford to buy the residence - it's insane. We could be using modern technology to build houses that just don't cost much so build, but that doesn't suit the builder's agenda. And because of the way we insist on building it, we build far less affordable housing.
I live in the valley in Los Angeles. A single apartment out here runs $700 per month, and yethere are a lot of parents barely making $10 an hour - how can you hope to get ahead? Why aren't we making simple 600 square foot condos available for these people to purchase? Or service housing as they have in Sweden, where families have bedrooms and a small common area in their home, but eat their meals in a on-premises cafeteria - thus saving the cost of building all those kitches, and decreasing the cost of food per person? To tantalize you further, a lot of those complexes also provide daycare at cost.
For that fact, we can take the 8x8x40 foot shipping cartons the international shippers use and that sell for $1200 a piece, bolt two of them together, add a small kitchen and bath and have a home for very little money - yes, I know there are land costs, etc. There are some beautiful buildings being built with these abandoned beasties, but no concerted effort here in the US to create affordable communities with them. BTW, they even collapse flat to moved almost anywhere on train cars - they are perfect housing source, and can be dressed to look like almost anything
Communities must create housing that reflects the wages that are being paid on local jobs. And if there are lots and lots of low income jobs, then reasonable mass transit must be provided as well.
Seems like common sense to me, but the oligarchy doesn't agree.
Horse Race gives a way to ignore this
This is such an interesting story.
One of the most infuriating things about the primary was that Hillary would talk about important issues and would be mocked. Then we'd get the greatest speech ever that lacked real substance or we'd hear vague hopey-changey crap. Or we'd hear endless stories about how the kitchen sink was about to come--when, in fact, it has yet to be thrown at Obama at all.
The media, with their enhanced ability to manipulate the country can now do the same crap over and over and over....and get away with it.
Paul, builders love 'cheap' --
it lets them sell high.
It's the underpants-gnome scheme gone RL.