Credit & Affordability: low interest rates increase buyers’ ability to pay higher prices.
Builders make more on larger properties, so there are 400% more homes being built over $200,000 than under $200,000.
Builders are beginning to target “starter” homes in suburbs with lower land costs, but, unless buyers work in Wilmer-Hutchins or Legacy, this often inflates transportation costs & time.
Infill near DART Stations is needed, & will increase the city’s tax base.
Also, there are financing difficulties due to appraisals & comps for most areas with lots of vacant lots.
Shrinking middle class: Middle-market retailers (i.e., Sears) closed retail outlets, while low end (Dollar Stores) grew.
Millennials have a lower net worth than their parents did ($10,460 in 2013 versus $15,260 in 1983) so, 1st-time homebuyers dropped from 40% of total buyers to 32%.
Renters Stuck Renting: Housing, tuition, & healthcare costs rose radically, while middle-class income fell ~5% from 2000 – 2014.
Rents outstrip incomes, causing many renters to spend over 50% of income on rent, & making saving for down payments difficult.
What happens when Millennials retire?
The average retiree’s net worth is ~$150,000 with ~$130,000 of that in home-equity, but homeownership fell to 63% (lowest since 1967).
If Millennials cannot buy a starter home, it stops the move-up chain reaction. For upscale homeowners, who are their future buyers?
When they retire, they will further strain the social safety nets.
Political Environment: Texas is a Right to Work state with a lower Tax Burden & cost of living, so we keep gaining corporate relocations from California, NY, etc. However, Governments that invest in transit (Dallas) & schools (Plano), attracts residents, visitors & businesses; communities that fail at this lose economic vitality.
Demographic shift: There are now more Millennials than Baby Boomers.
- Millennials prefer experiences over objects & buy more online, so retailers downsize their brick & mortar stores & use them to provide service options & to create an experience, like Tesla or Apple showrooms, but actual purchases are made online. Amazon replaced Wal–Mart as biggest dollar retailer, & retail stock index declined 15% despite increased retail spending.
So, Local retail is replacing chains, to create unique shopping experiences.
Millennials place more value in communal space than in ownership, so look for increased renting. They are less materialistic, more environmental, & want smaller sq. ft. dwellings with larger shared & retail spaces. They drive the trend to Densification & Urbanization (walkability: like Uptown; Deep Ellum/ Baylor; Mockingbird Station; & Downtown Dallas).
Many Millennials & empty nesters like to live, work, shop, & play without car ownership. This drives values up near Rail Stops (including trolley).
Businesses want to satisfy workers, so GE will move from suburban Connecticut to Boston’s walkable urban area that is 5.5% of the land, but ~40% of residents live or work there.
It’s projected ~80% of development in the next 20 years will go to walkable urban areas.
When Millennials truly need a car, a couple may share one, use Lyft, &/or Zipcar car sharing.
- The Sharing Economy lowers living cost & provides income to folks who drive for Lyft or rent rooms on Airbnb.
In 5 years, 40% of Americans will be freelancers in the collaborative economy.
- W. (Hugh) Resnick