Some good news about the housing shortage

Plus, how to light a fire under hesitant buyers

Grace Townsley
March 22, 2022

This week we’re celebrating!

James here. It’s David’s 40th Birthday! Happy Birthday ya old geezer ;) 

David and I have been through it all together. We’ve known each other before we could speak. Our mothers were best friends in London. Fast forward to today–we’re celebrating in Aspen with our wives, kids, and 37 years of wild memories (most we can’t share publicly). 

Not to get all sappy here, but I’ve got to share my appreciation. I wouldn’t be where I am today without David’s input in our business and my life. I’m a deal junkie, always running and chasing. But David is level-headed and incredibly savvy. He balances our business partnership! 

If there’s anything I’ve learned through 30 years of friendship and a decade of real estate, it’s always nice to bounce ideas off of someone you trust. If you’re struggling to close a deal, make a sale, or find a lead, tap a close friend or mentor. I promise it’ll help. 

I couldn’t have imagined moving across the world with anybody else. I know they often say don’t go into business with your friends, but I wouldn’t have had it any other way. As we venture further with our newest project, The Blueprint, we are grateful to have you along for the ride!

-James 

New construction is finally picking up

Source: Unsplash

Nationwide, we’re facing a shortage of an estimated 5.8 million homes. But February's data shows thousands of new properties are already in the works: 

  • New home construction was up 6.8% last month, the highest jump since 2006 
  • Single-family home construction is up 22% YoY
  • Construction of multi-family buildings with 5+ units has risen 37.3% YoY

Our take

Take this as a signal that there will be more inventory coming onto the market soon. If your buyers are losing bidding wars, use these stats to give them some hope. There could be a lot of potential opportunities coming down the pipeline soon.

New bill could shake up California real estate

Source: Unsplash

A newly proposed housing bill is sending shockwaves across California. If passed, the  “California Housing Speculation Act” will increase capital gains taxes by up to 25% on any home sold less than seven years after it was purchased. 

What triggered this new bill? A report by the California Association of Realtors showing that 51% of homes sold in Q3 went to investors. The tax increase is meant to discourage investors from quickly flipping homes and pushing up prices in areas where affordable housing is already scarce. But it will also impact regular homeowners who make improvements to their property and then move before the seven years have passed. 

Our take 

Honestly, we’d be surprised if this bill passes. Yes, there’s an enormous need for affordable housing, but this policy isn’t the answer. Not every person who buys and sells a home is looking to flip it. Some people have perfectly legitimate reasons to move, and this bill doesn’t leave any leeway for those sellers. If passed, it would have too broad an impact and will hurt more people than it helps. 

Now employees can work for home 

Source: Bloomberg

To keep their workers within reasonable commuting distance, an increasing number of employers are now buying or building housing for their employees. These employee-sponsored developments are popping up in tourist towns like Hilton Head, Orlando, and Pigeon Forge. They are also becoming popular in Bozeman and Newark. 

Some companies are offering their own housing, while others are partnering with a third party who can handle day-to-day property management. It’s a valuable benefit to the employees who work in these expensive markets, and provides another solution to the affordable housing shortage. 

Our take

This trend has the potential to be huge for the market. Not only does it improve the supply of affordable housing, we could soon see entire cities built around companies. It’d be like a college town, but for corporations. This trend could be great for local economies, and open up huge opportunities for local businesses. If you’re a broker or investor, keep an eye out for companies and the cities they are thinking of building around.

Schematics 

The news that just missed the cut

Source: Palm Beach Daily News

Foundation Plans

Advice from James and David to win the day

Last week I (James) sat down with Ken and Danille McElroy to talk about the latest housing market developments. In that interview, we talked about how to respond when your client says they want to wait until the market drops to buy. Here’s my opinion on that hesitation: 

  • Nobody has a crystal ball. Not you and not me. Unfortunately, no one can time the market. 
  • The market crash you remember, back in ‘08, was a completely different situation fueled by bad debt and poor lending standards. That’s not what we’re seeing today. It’s highly unlikely we’ll ever see a drop like that because, this time, these high prices aren’t caused by a bubble. 
  • When it comes to family homes, you have to look at the next 20 to 30 years. Even if you’re paying more for your home right now, two decades from now, it will be worth even more and you’ll be glad you bought when you did. 

Catch the full interview here

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

Source: Rocket Mortgage

Today’s housing market is absolutely bonkers. It can shift on a dime. Always, always, always capitalize on every opportunity you have when times are good! Because you never know what kind of curveballs the market will throw at you next. 

See you on Friday.

- James and David

P.S. Got a question? We answer them every Friday in the newsletter. Have at it here!

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