Dodge Data & Analytics’ 2016 Construction Outlook report projected 6% growth, with the value of new construction reaching an estimated $712 billion. What will this new growth look like?  

A google-image search can reveal something about our schema for “new home construction” — Oh yes, the suburban neighborhood. See the studs of the American dream? Two car garage, 5 bedroom, with a playroom or movie theater in the basement.

Those buyers had 9-5, jobs with W2s, maybe a two-income household; a shoo-in for a mortgage. Now there they are! in their big living rooms; not in the market. Those buyers are housed, so who is next?  

“Affordability,” says demand, “What is this affordable housing and market-rate? There’s a gap between. Build for market-rate, first and the government incentivizes the second. The middle. The gap is large, and You can can call me Market, the third”. Demand waits patiently.
“Market, the third, in that case, I will utilizes technology in order to maximize profit to spite my issues with force*, hmm to help I could save on property taxes with Market the second…” The builder goes on muttering.

*How American! The climate for immigration these days is poor, and as a result the work force that builds our shelters is low. Think about that for a second. Think about this election. Okay, moving on into houses.

One way to compensate is to pull up your boot straps and do it yourself, DIY – How American! and create….

  •  an off-site way to build – pre-fab homes, mobile homes, sky rises even. 
  • Yes, the American also know the machine, robotics AND the classic nail and hammer way.
  • This pre-fab idea has worked really well for cookie-cutter suburban neighborhoods that low-earners cannot afford. Now that we have serviced the customer to the best of our workforce ability, let’s see what other parts of the market there are to profit from?

Low-Earners Are an Untapped Segment of the Market and Builders Are Figuring Out How to Reach Them.

And for new home developments, first-time home buyers, a group comprised of immigrants and immigrant Millennials, born citizen Millennials. And the Grandparents, the Baby Boomers, don’t forget about them just yet; It’s time to relocate! The prefab thing might work, but is it green? Because a sort of hippie thing happened with Grandma and Grandpa…and there’s this talk of global warming? I don’t know but…either way the Millennials and the Baby Boomers have some desires in common and the builders are ready to increase their growth into all parts of the market more aggressively.

First-time buyers are obviously an untapped segment of the market and builders are figuring out how to reach them.

Poor credit or no credit is an issue for both of those groups. That’s fixable! With higher incomes, obviously but also credit repair, rent-to-own, cheaper rent OR a mortgage. 

Right now it’s more expensive to rent than to buy in over three quarters of the US housing markets. Come on supply! There’s a gap in supply meeting demand! Pressure is in from all sides. Work force is low due to poor outlook on immigration, good job market in this case for certain jobs. Technology is helping to tighten up the ranks at work. And home buyer preferences are guiding supply…at least in most places.

Super Smart Phone, Which Does The Usual Things, Here to Save the Day!

What is happening that people can work a full time schedule and have a hard time making rent? Only certain careers, and income brackets can live in certain areas?
The very un-eco-friendly smartphone is ironically, maximizing efficiency and making business more sustainable. The networking (versus hierarchical) and collaborative (versus independent) focus of the millennial generation is influencing the Gen-X boss-builder… one way, through apps. If the builder has a need, there’s an app for that:

  • permits

  • buying and delivery of resources

  • inventory

  • payroll apps

  • safety

  • remote operation of equipment

Apps like this are even helping balk some unhelpful trends. It’s not the most welcoming climate for immigration, and that’s a hit to the construction labor force. There’s a high demand for skilled labor and a low supply of willing laborers. It might only be a matter of another year before the low-income are trained and hired for higher paying construction jobs. Who knows.

This is classic free-market behavior. We specialize; we are more efficient, and THIS YEAR not for the ends of bigger is better. 

“Let’s be more conscious of the effects on the planet,” more and more are saying, and it just so happens this is part of the solution to affordability.

It’s hard to prove, but apps might even help this problem: More than 85% of the nation’s markets have rents that exceed 30% of the income of renters. That’s like saying almost all one out of three doesn’t matter…that renters isn’t making it. Yet. If the builder can make the home cheaper and faster AND it fits into our earth-friendly paradigm…

Apartment living? It fits the collaborative call to action from millennials, certainly. A new version of “The projects” might be one way builders hit the market. The Low-Income Housing Tax Credit, LIHTC is pushing that along. A builder can pay less in property tax if a percentage of their units are rent-restricted. The funds are distributed to each state at a rate of around $1.75 (changes to accommodate inflation), paying the tax in place of the builder. The pressure is off, except the paperwork. Is there an app for LIHTC yet?

It’s Cheaper to Buy Than Rent in Three-Quarters of the United States.

BUT Millennials make up a large percentage of the people in the market for housing, and A nationwide survey conducted by Bank of America revealed that millennials are far more hesitant to purchase a traditional starter home as a placeholder until their dream home becomes available and affordable. 

Tiny Homes actually fit that bill quite well, and most are purchased without a mortgage – in cash.

Building based on the square inch is trickier than building by the square foot but there are perks.

Minimalism and minimization is the current trend, and affordability rides that wave naturally.

Just like large buildings are often off-site constructed, a tiny house can obviously be built indoors without inclement weather making construction quicker and cheaper – and can be shipped anywhere. Not unlike a tiny monopoly house.

Doug Schroeder, a 20-year veteran of home building founded Alabama-based Timbercraft Tiny Homes late last year. He’d been in the big sea – the big building business but caught on that there’s the whole neglected group of buyers who want something a bit different.

The millennial preference is epitomized in a tiny house. Even normal-sized houses are smaller than they used to be, and have similar features to the tiny house. As a home seller you can utilize these preferences, too. 

After a go-ahead from the Federal Reserve short-term interest rates are going to go up and up, but projected to be still below 5% by year’s end. Long-term interest rates will rise more gradually. Signing a thirty-year fixed mortgage will still look appealing to some. It’s a good year to buy.

You might believe that’s out of your realm of possibility? Ghost of past mistakes? On disability? Your cry is heard. More and more agencies are coming to rescue, like this one. Predictions for 2016 are looking up, in part because it will be easier to be approved for a mortgage.

Minimalism and minimization is the current trend, and affordability rides that wave naturally.

Let’s dig in to what affordability looks like, shall we? An ideal budget follows a 50/20/30 ratio.

50% should cover all bills: housing, transportation, technology, insurance, etc. 20% should go towards financial goals: savings, retirement, investments, etc. That leaves 30% for tithing, fun money, flex spending. Those 20% and 30% categories aren’t a reality for an outrageous amount of people. That’s a problem–granted, not a new problem. 

Click here if you have some problems with you stakes in the real estate market and you’d like to move on up with a better budget, space, and life!

The post Why New Home Construction Wants to Focus on Affordability appeared first on Your Rent-to-Own Consultants.