The Expert Podcast

All you builders and contractors out there, let us know what you think about this new analysis of finances of consumers who 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, homebuyers must now earn a hundred and seven thousand dollars 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.

The 107,000 is a big deal, but the jump is huge. Think about that: if you take a hundred and seven thousand dollars minus 73,000, that's a thirty-four thousand dollar increase in the income that somebody needs to buy a median price home. Thirty-four thousand. Well, if you take thirty-four thousand over to seventy-three thousand, it used to be, that's a fifty percent jump in the amount of income somebody needs from one year (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 or 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 on to 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, so there's already a three or four million home deficiency in the marketplace. There's three or four million people that 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. Until the 1980s—back in the '50s, '60s, and '70s—homes were built to basically last forever. They were built using true two-by-fours, bigger lumber. They had 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, but actual sheathing, not OSB.

In the 1990s, or about 1990, the home construction business model changed, and 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: you live there for 20 years, somebody buys it for 20 years, and now the house is done. Well, 1990 was about 40 years ago—it'll be 2030. 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 just beyond repair?

And it doesn't have to be from 1990. There are some houses that were built in the 2000s and 2010s that are ready to not last anymore. There's water intrusion, structural failures, and air infiltration. How much of that is common these days? So, the question is, if there's already a three million or four million house shortage on inventory, if there's no new homes being built for the next three years, and there's 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.