The Expert Podcast

All you builders and contractors out there, let us know what you think about this new analysis of finances of consumers that are buying houses. According to National Review, it takes a six-figure income now to afford a median home. This is a big deal. In fact, it’s more than just a six-figure income; it’s the increase. According to the report, home buyers must now earn $107,000 to be able to service a monthly mortgage payment in 2022. By comparison, Americans only required $73,000 in 2021. So that’s a one-year jump—yeah, the $107,000 is a big deal, but the increase is huge.

Think about that: if you take $107,000 minus $73,000, that’s a $34,000 increase in the income someone needs to buy a median price home. $34,000. Well, if you take $34,000 over $73,000, that used to be a 50% jump. A 50% jump in the amount of income somebody needs from 2021 to 2022.

Now, forget about what that does for the housing market or for prices or for sales volumes. What I want to know from you builders and contractors is, what is that going to do for your business as a builder? If you are a general contractor, if you're a builder, are you going to be building any spec homes? Are you going to be launching any major new developments for building subdivisions? What do you think it’s going to do for remodels? What do you think it’s going to do for additions?

Well, the logic says that if it takes $100,000 to buy a new house, people aren’t going to be buying another house. They’re going to be adding onto their existing house. If you’re already a homeowner, you’re going to be remodeling your house. So it may help remodels, but is it going to be a self-fulfilling prophecy? Here’s why: if builders aren’t going to be building new homes on speculation, or if fewer people are going to be buying new homes, new construction is going to slow to a halt. In fact, it already is. What is that going to do for home inventories in 2025, 2026, and 2027?

Right now, there’s already a 3 or 4 million home deficiency in the marketplace. There are 3 or 4 million people who want to buy a house, but there are no houses available for them. If you go another two or three years without building sufficient new inventory and more people want to come into the market, that’s just going to make that number higher.

Here’s another big deal, and I want to really hear what you have to say about this: up until the 1980s, in the '50s, '60s, '70s, homes were built to basically last forever. They were built using true two-by-fours, bigger lumber, proper siding, and sheathing, and all kinds of more robust construction. We all know that. We’ve seen homes when you do your remodels that have beams above the ceiling in the basement that have actual two-by-fours, not one-and-a-half by three-and-a-half, actual sheathing—not OSB.

In the 1990s, or about 1990, the home construction business model changed. The major builders started building homes that were designed to last for 40 years—not forever, not a lifetime. And if it’s going to last for 40 years, that’s enough for most people. Maybe two generations: someone lives there for 20 years, and then somebody buys it for 20 years, and now the house is done. Well, 1990 was about 40 years ago. It will be 2030 soon. So, will there be large numbers of homes that are existing resales that will no longer be able to be maintained—can't fix them anymore? Are you already starting to see any of that? Are you seeing houses that are already beyond repair?

It doesn’t have to be from 1990. There are some houses that were built in the 2000s and 2010s that are ready, and can’t last anymore. There’s water intrusion, structural failures, air infiltration. How much of that is common these days?

So, the question is: if there are already 3 or 4 million houses short on inventory, if there are no new homes being built for the next three years, and there are potentially hundreds of thousands of homes that were built in the '90s or 2000s that will come out of circulation because they can’t be maintained, what is that going to do for the housing market? Let’s say in 2030, will there still be a shortage of homes, and what’s that going to do for pricing?

Your opinion is valuable. We want to hear what you think from the perspective of a builder or a contractor or even somebody who works for a builder so we can get an idea of what you’re seeing in your neck of the woods.