In the four plus decades I have been in the residential construction business, I have never seen such a market change as we are experiencing today. History always repeats itself and the evidence is clear that it will do so once again. The boom years we have experienced since the end of the Carter Administration have come to a conclusion as far as what will be in demand. We are heading for major changes in the American housing market and the best position to be in, is counter culture.
After the Great Depression, the US housing market went from gilded glory to small, affordable housing. World War II sparked what would become the "Baby Boom" as returning GI's sought entry into the work place and a place to raise families. The suburbs were born. For nearly thirty years, housing was modest in nature and an affordable dream for the masses. The mansion was out, the modest was in. What we see today is the same trend. The McMansions have run their course, and at up to 70% off of their highs, are not likely to rebound within the foreseeable future. There are 78 million Baby Boomers set to reach retirement age over the next 15 years, 24% of our population. These "Boomers" who hold a vast amount of wealth will begin to downsize over the next two decades. Split levels, two stories and large homes will not be in demand. The result? Stagnant or decreasing values for homes that do not suit their needs and with price points above $500,000.00.
Our fiscal house is in major disarray. With 14 trillion dollars of national debt and the massive numbers of Baby Boomers coming in to the entitlement system, Social Security and Medicare/Medicaid, we all know our taxes are going to go through the roof. Expendable income for the working taxpayer will likely be 50%, or less, of their gross earnings. The global labor market will continue to apply pressure on American wages resulting in a much lower standard of living for the first time in modern history. Inflation, higher interest rates and commodity costs are all sure bets. Energy costs can do nothing but rise until the mindset of the American people changes and demand decreases substantially. These are all drains on expendable income that have a dramatic effect on housing. Capital gain, death and entitlement tax increases will also stifle the ability of American families to pass on wealth to future generations. This is nothing new, we have the European models currently in operation to see where we are heading.
So what is the wise choice? What are the trends and where am I safe? Think smaller. 1600-2200 square feet, quality construction, low maintenance and high energy efficiency. Ranches and 1-1/2 stories will do well. Homes that feature handicapped ready convertibility, flexible room use and practical finishes will excel. I have lived long enough in this business to consult our Clients on one basic fact. Nothing is new and everything runs in cycles. Be careful of investing money in trends that will surely change, like granite tops and stainless steel appliances. Put in your home what you like, but always keep in mind, what is popular today will not be in ten years. Price points less than $300,000.00 in great locations is a safe bet. Obviously, the lower the price point the easier the future sell will be, as we are witnessing today.
The American Dream has been to own a home. The past fifteen years altered that to owning a McMansion. With this major market correction and future trend, that is an investment I can guarantee will fail. We are moving in to territory we haven't seen in over 50 years, a simpler, modest lifestyle. That is not a bad thing. Prepare yourself for the future by planning your home investment wisely. At Rankin Homes, we are developing subdivisions in the near future to tailor to the needs of everyone. From young families to those downsizing, our vision will provide a beautiful place to live, a higher quality of living in less and affordability across the board. Our success is based on your success. Plan wisely and always project ten years ahead for your housing needs. You can be in control of your future in housing. The great news is, if we are wrong, you can always up size.
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