With heightened stakes on getting it correct, or losing a lot, homebuilders’ Jeopardy response keeps being roughly this.

“What is the housing market in a

Hybrid – a remote and office mix across a 5-day week – may mean the distance between job center and home can stretch by some measure. But will it be so elastic as to enable the working household to drive until they qualify for a mortgage loan-to-income they can afford?

Stanford’s Bloom says:

We call it the “Donut Effect.” The places losing the most people are centers of big cities. Downtowns are doing very badly, they’ve lost roughly 15% of people and businesses, and the suburbs of the same large cities are doing really well. In fact, it looks like the suburbs of large cities are the hottest property markets. We think that this is all due to the move to hybrid. If you can work from home two days a week, it makes it more appealing to live in the suburbs because you have to commute less. But it makes it impossible to go and move to Alaska, it doesn’t work.

Third, residential developers, investors, and builders should remember how humbling their path-of-growth  models of a little over a decade ago worked out to be. Those roadmaps, based on “real demand” – demographics, job formations, household formations, and family formations, plus solid corporate earnings, of the 2003-to-2007 housing economy – exposed the risks in overinvesting in trends that seemed logical and rational.

That they were fueled by illogical and irrational financial mechanisms seemed beside the point at the time. One could say that now, in an economy buoyed more by Central Bank largesse than it ever has been before, there’s some irrationality around to spare.

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