Housing Construction Has Hit All-Time Low… Will Realtors Be Affected?
There’s no question that there has been a multitude of pessimistic – yet, realistic – projections going on about the near-future of the housing market. Bubbles are supposedly on the verge of bursting in many cities not just in the United States, but in other markets around the world. Many sources think they know the reason or reasons for all of the commotion — houses are too expensive in comparison to income, the rent is too high, the job market is doing poorly, Airbnb is taking over — etc. People are scared that history is bound to repeat itself, and they are concerned that the Feds aren’t taking action to prevent that from happening by lowering rates. And, while the Feds are convinced that what we’re seeing is just a correction of the market, there’s no denying the numbers — especially, the rapid decline in housing construction throughout the country.
The question is, what does it mean for Realtors?
Housing development has its biggest slump since the financial crisis
According to CNBC, shares in homebuilding stocks have decreased by 40% since January, similar to rates that we saw in 2004 at the beginning of the recession. In addition to these numbers, we are also seeing a rapid decline in real estate sales overall, as well as a slump in mortgage applications, week after week. There’s no question that this type of chain of events could certainly trigger yet another housing crisis, and those who have not only their own homes to worry about, but a job that depends on the stability of the market — Realtors — have every reason to be concerned.
A sign of things to come, or merely a correction?
Despite all this, the government feels as though what we’re experiencing now cannot be compared to what happened back in 2008. The Financial Times stated that factors such as subprime mortgages and the ratio of income to housing prices, was much more evident and extreme in the months leading up to the crash than it is now.
Additionally, back then, investments in housing development rapidly rose to 6.7% of the GDP and then went down to 2.3% in just four years. Today, even though the numbers dropped 2.5% in the beginning of 2018, that’s still not as dramatic of a drop as we had in the past. Additionally, housing prices are still on the rise, whereas in the last crisis, people lost a major amount of equity in their homes, which is not quite what’s happening right now. Combined with several other factors, the Feds — while acknowledging that some of the numbers are cause for concern — aren’t indicative of a full-on recession.
The rise in prefab and modular homes
Another factor that could potentially be impacting the decline in housing development stock? It could be the rise in prefab and modular homes. Based on an article by MultiBriefs, modular homes are becoming a more popular option for homebuyers who want the house to fit their needs and life-choices — not the other way around. There is “design freedom” in a modular house that you just can’t get with a turn-key home. Since modular homes are bought directly from the companies who make them, this certainly could disrupt the traditional housing markets that Realtors rely on for their job.
What it means for Realtors
A decline in the housing development numbers is never a good sign, even if it’s not necessarily suggestive of a destructive housing crash or overall economic recession. That being said, Realtors should continue to pay close attention to the news and trends to be a step ahead of what may or may not happen. We can’t forget that in the last recession the Feds were also being optimistic when the signs of crumbling were painstakingly obvious to the experts. For the moment, Realtors shouldn’t have too much to worry about, but it doesn’t hurt to start saving money and diversifying their income, just in case.
What do you think these numbers are indicating? How are you preparing? Let us know in the comments below!