There is a heavy premium that is placed on purchasing a single family detached property. In the past, condos were seen as a fine entry point into the housing market before trading up to a single family detached home. But with current home and condo prices, people are looking at making their first purchase stick. Since there appears to be a slowdown in the housing market, we are seeing some interesting marketing on how properties are pitched. One of them is the condo alternative pitch on smaller properties. These homes are targeted to those desperately trying to get their foot into the housing market even if the home is smaller than a condo. I’ve seen a good amount of these properties hitting the market in Pasadena. I would imagine that many buying these places are planning on leveraging up in a few years and going with a bigger property, especially if they plan on having a family given buying a home tends to set the stage for kids. Let us take a look at a current property in Pasadena that fits the bill.
There tends to be this notion that politics and housing are fully separate realms. Never do the two meet. Yet there is a large connection between politics and housing. Even during the bailouts the propaganda was that too big to fail banks needed to remain to provide loans for middle class families. The underlying assumption was about keeping affordability alive. Instead housing once again has become unaffordable for many and prices are out of reach for many middle class Americans living in large cities. As it turns out, it appears that cities that tend to vote liberal actually have some of the worst housing affordability. San Francisco is the worst offender. Ironically the politics are largely one of strong protections but what unfolds is massive constraints on land usage and NIMBY policies that constrain inventory. Even things like Proposition 13 simply inflate prices for the locked in low tax rate while the big pitch here was to keep grandma from being booted out in the street and eating Kibbles ‘n Bits. They forgot to mention grandma was actually holding onto a lottery ticket. Now grandma lives in a million dollar shack in San Francisco but still shops at the dollar store. Places like the South, including Texas have conservative policies and some of the most affordable real estate in the United States. It would appear that liberal cities are no place for the middle class but of course there is more to it.
Never in the history of U.S. home sales have we had institutional investors so involved in the single family home market. In many areas once the bubble popped, we had big and small investors swallowing up over half of all sales for many years. The deals are now harder to find and investors are pulling back in a big way. We also have fewer distressed properties on the market so the properties that do make it to the “for sale†section tend to have more wiggle room in terms of sellers being resistant to lowering prices. For example, back in 2009 nearly 50 percent of all sales were of the distressed variety nationwide. Today, it is slightly below 10 percent. It is a good thing to have fewer distressed properties out in the market. But what happened over the last decade is many of the 7,000,000 foreclosures shifted from individual families into the hands of large and small investors. This is how we have a very large swing to renting households. It might be useful to take a deep look at all cash sales today.
There is a running meme in the housing industry and it revolves around intelligence and home buying. The subtle undertone is that those that own real estate are somehow much more financially savvy because they own property. I’m surprised we don’t see this on LinkedIn as “…and also intelligent homeowner.†On paper, at least nationwide, homeowners do have a higher net worth than renters. Yet this is nationwide and also doesn’t go into the details that most of the net worth is locked in housing which does not throw off income. So are all those young tech workers in San Francisco that currently rent financially ignorant? That is the issue when using nationwide figures to extrapolate onto niche markets. It also doesn’t factor in the reality that for many, buying today at current prices would equate to self-imposing a financial albatross around your neck for many years. That of course assumes you can even buy to begin with. And keep in mind the recent economic upturn hasn’t been all that great. The recent election was driven by frustration regarding the economy. That is how you explain the cognitive dissonance of Republicans “winning†yet many states enacting higher minimum wages. Huh? These things speak to the underlying tone of economic frustration Americans are facing. Then we have the FHFA trying to make it easier for people to get into further debt by making lending standards weaker. Ultimately you have sales collapsing and people on the fence because buying a crap shack today would financially cripple many households for years to come.
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