{"id":110581,"date":"2021-03-27T16:28:01","date_gmt":"2021-03-27T16:28:01","guid":{"rendered":"https:\/\/fin2me.com\/?p=110581"},"modified":"2021-03-27T16:28:01","modified_gmt":"2021-03-27T16:28:01","slug":"covid-19-is-driving-millennials-out-of-cities-and-into-first-homes","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/covid-19-is-driving-millennials-out-of-cities-and-into-first-homes\/","title":{"rendered":"Covid-19 is driving millennials out of cities and into first homes"},"content":{"rendered":"<p><cite>New York (CNN Business)<\/cite>Jeffrey Mezger is a 40-year veteran of the real estate industry. He&#8217;s never seen a stronger housing market than this one.<\/p>\n<p>&#8220;It&#8217;s crazy. There is no inventory,&#8221; the CEO of KB Home told CNN Business.<br \/>\nFor wannabe buyers, the shortage of homes on the market, combined with a surge of competition from other purchasers is setting off bidding wars, all-cash offers and no end of sticker shock. <\/p>\n<ul><\/ul>\n<p><img decoding=\"async\" alt=\"Homes are selling at record speed as buyers scramble to find properties\" class=\"media__image\" src=\"\/\/cdn.cnn.com\/cnnnext\/dam\/assets\/210322162655-us-home-for-sale-0113-large-169.jpg\"><br \/>\nBut this one-two punch of very low supply and roaring demand is suiting homebuilders just fine. <\/p>\n<ul><\/ul>\n<p>&#8220;This is the best housing market I&#8217;ve seen in my career,&#8221; Mezger said. &#8220;It&#8217;s a good time to be a homebuilder.&#8221;<\/p>\n<p>KB Home&#8217;s first-quarter profit swelled by 62%. It handled more home transactions than in any first quarter since 2008. The company&#8217;s backlog surged by 74% in value, and nearly doubled in the West Coast.<br \/>\n&#8220;There isn&#8217;t a city we&#8217;re in where I would say it&#8217;s a tough market,&#8221; Mezger said.<br \/>\nNot only is <span>KB Home<\/span> <span>(<span>KBH<\/span>)<\/span> making far more money now than a year ago, it&#8217;s making more money per home built. Profitability per unit is up 73% year-over-year to $41,000. <\/p>\n<h3>Record-low inventory<\/h3>\n<p>It&#8217;s the polar opposite of what the company faced during the subprime bust that began around 2007, when the housing market was gripped with a massive oversupply problem that took almost a decade to correct. Construction of new homes collapsed in the aftermath of that crisis and never recovered. The supply of new homes remains very low today.<br \/>\n&#8220;We&#8217;ve been under-building for the last 15 years,&#8221; said Mezger.<br \/>\nAs of the end of February, housing inventory tumbled by nearly 30% year-over-year to a record low of 1.03 million, according to National Association of Realtors data that goes back to 1982. Last month, homes typically sold in just 20 days \u2014 a record low.<br \/>\nSupply is so short that it&#8217;s limiting the number of homes getting sold. Existing home sales fell by almost 7% between February and March, according to the NAR, which blamed the decline on &#8220;historically low inventory.&#8221;<\/p>\n<h3>Mortgage rates are creeping higher<\/h3>\n<p>New home sales have also cooled off recently.<br \/>\nIn February, new home sales tumbled by 18% to a nine-month low. Economists blamed last month&#8217;s freezing temperatures in parts of the United States but also said the sales drop points to concerns about high prices and affordability.<br \/>\n<img decoding=\"async\" alt=\"Zillow and Trulia hit with antitrust suit claiming they&amp;#39;ve made it harder to find some listings\" class=\"media__image\" src=\"\/\/cdn.cnn.com\/cnnnext\/dam\/assets\/210309125752-zillow-search-page-laptop---stock-large-169.jpg\"><\/p>\n<p>&#8220;Mortgage rates are rising, consumers are shifting spending to reopening activities vs. at-home and we aren&#8217;t looking at the same degree of pent-up demand as in early 2020,&#8221; economists at Bank of America wrote in a note to clients this week. &#8220;We think housing activity is set to moderate.&#8221;<br \/>\nMortgage rates remain very low historically, although they have crept higher in recent months. The average interest rate on a 30-year fixed-rate mortgage hit 3.09% last week, the highest since June.<br \/>\nHigher borrowing costs will help cause housing affordability to decline by 5% to 6% this year, despite strong income growth, according to Bank of America. <\/p>\n<h3>Surging lumber costs are making homes more expensive<\/h3>\n<p>Still, housing CEOs remain upbeat, in part because demand is being driven by a new flock of buyers. Millennials make up the largest cohort of buyers for KB Home, a trend the company said began before the pandemic.<br \/>\n&#8220;Post financial crisis, millennials either saw their parents lose their home, couldn&#8217;t get a job or had a lot of student debt. Millennials deferred their first home purchase much longer than previous generations,&#8221; said Mezger.<br \/>\nHe added that KB Home is also seeing strong demand from Gen Z homebuyers.<br \/>\nBeyond affordability, one challenge facing homebuilders is skyrocketing construction costs.<br \/>\n<img decoding=\"async\" alt=\"Here comes $3 gas, just as Americans start traveling again\" class=\"media__image\" src=\"\/\/cdn.cnn.com\/cnnnext\/dam\/assets\/210322141005-usa-gas-prices-large-169.jpg\"><br \/>\nNinety-six percent of builders surveyed in the 2020 National Association of Home Builders survey reported building materials as the top challenge, up from just 66% in 2019.<br \/>\nThe No. 1 culprit is the shortage of lumber. Prices for lumber have skyrocketed in recent months because surging demand and shrinking supply, making it much more expensive to build new homes. <\/p>\n<ul><\/ul>\n<p>The elevated price of lumber alone is adding about $24,000 to the price of new homes, according to the NAHB.<br \/>\nAs for KB Home, &#8220;We&#8217;ve been able to raise price enough to cover the cost and raise our margin,&#8221; Mezger said. &#8220;Demand is that strong.&#8221;<br \/>\nSource: <a href=\"https:\/\/edition.cnn.com\/2021\/03\/26\/business\/housing-market-shortage\/index.html\" target=\"_blank\" rel=\"noopener noreferrer\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>New York (CNN Business)Jeffrey Mezger is a 40-year veteran of the real estate industry. He&#8217;s never seen a stronger housing market than this one. &#8220;It&#8217;s [&#8230;]<\/p>\n","protected":false},"author":3,"featured_media":110580,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Covid-19 is driving millennials out of cities and into first homes - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/business\/covid-19-is-driving-millennials-out-of-cities-and-into-first-homes\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Covid-19 is driving millennials out of cities and into first homes - Fin2me\" \/>\n<meta property=\"og:description\" content=\"New York (CNN Business)Jeffrey Mezger is a 40-year veteran of the real estate industry. 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