2 minute read$400,000.
Give or take a little that is the current median new home sales price. Five years ago it was $360,000. From 2016 to 2020 prices did rise steadily, about 5% annually. But this year they have exploded, rising 16%, from $344,000 to almost $400,000.
(Which reminds me that when I was 14 years old in 1964, my father packed us into our new Chevrolet Impala – more on cars to come – to show us the first $100,000 home any of us had ever seen. He had just bought a $43,000 new home with a dishwasher, central air conditioning, and an automatic 2-car garage door opener, the first I’d ever seen.)
But back to the column. Yes, there are rumblings about inflation, but there is not yet any sign of panic in the housing industry. And there are good reasons for that:
- In spite of the huge increase in housing prices (by the way the median price of existing homes also increased 15% year-over-year), the homeownership rate actually increased with households under age 35 making the largest advance.
- Again, in spite of almost astronomical housing prices, the real monthly cost of home ownership is about the same as it was in 1990.
I’ll answer that with a firm maybe.
Today, even with the emergence of 10 or so really big builder firms, housing production is far less concentrated than the 1970s auto industry. As a result I’d also say that it is a lot less hidebound, and it is a lot closer to its customers. The big three automakers were all in Detroit, and they all sold cars through independent dealerships. On the other hand, housing at its heart is still a local business that depends on considerable customer contact.
Then there is the recent example of Katerra, which promised it could build homes better, faster and less expensively.
Of course Katerra failed, but that doesn’t mean that another company, one like Toyota for example, isn’t already waiting in the wings to challenge an industry that might just be happier and fatter than it should be.
