The Changing Picture of Housing in America

It's hard to buy a house when you make a living playing "Twinkle, Twinkle, Little Star"...

Just take my aunt's word for it. She has taught an army of three-year-olds to play the song on violin.

That's not all she does, of course... She's a brilliant instrumentalist and has performed with symphonies across America. One time, she even backed up legendary singer-songwriter Smokey Robinson.

My aunt is also licensed to teach the "Suzuki method." It's a music-education program and teaching philosophy that claims kids can develop musical talent in much the same way as they learn a language. (That's why she has been teaching all those "Twinkles" to toddlers.)

My aunt has done well in her career... But she still earns a musician's salary. So when she moved to my hometown in Northern Colorado, her homebuying prospects were limited...

It had been decades since she bought her single-family home in Iowa. And the market north of Denver was much more expensive than the one she came from.

She was looking to downsize... And I had recently inherited a condo I was eager to unload. So I decided to rent it out to her.

My aunt has been a perfect tenant. She pays rent on time and makes no complaints. In fact, this arrangement has been going so smoothly that I'm in the process of selling her the property outright.

Soon, my aunt will have the deed to her own place... a unit in a multifamily building.

It may not be ideal for most folks... But it's the perfect fit for what she needs. And the data tells us that this style of living will only become more common.

Let me explain...

In 2016, Realtor.com started tracking the median number of days that U.S. homes stayed on the market... in other words, how long it takes to bring a newly listed home to closing.

That December, homes reached the finish line after an average of 92 days on the market. The timeline sped up to 64 days in December 2020.

And in December 2021, the average dwindled to just 54 days.

This is a theme I've written about a lot here in DailyWealth. And it's one of the biggest stories in finance right now...

There just aren't enough houses in America to satiate demand.

As of December, the U.S. home supply index was hovering at six months. This means it would only take half a year to sell every available home in the U.S. (assuming no additional homes crop up and a constant rate of purchases).

That's a 50% decline from the last home-supply peak in January 2009.

Meanwhile, the number of active U.S. home listings has cratered nearly 70% since July 2019. And it's still trending lower.

So with home supply vanishing... and with demand ramping up... the only way out of the cycle is more inventory. And sure enough, developers are rushing to close the gap.

We've seen an epic rally in single-family home authorizations. The action started in November 2020... But it has tapered off after peaking last June. It is now down 9%. Take a look...

But there's another side to this story. Take a look at multifamily home authorizations over the same period...

Multifamily authorizations have enjoyed a rally that mirrors what we've seen in single-family homes. The difference is, the multifamily rally is showing no signs of slowing down...

In fact, multifamily authorizations jumped 30% while single-family authorizations declined. And the National Association of Home Builders says its outlook for 2022 "calls for relatively flat conditions for single-family construction, with additional gains for multifamily and remodeling," according to the group's chief economist.

The writing on the wall is in neon.

We're going to see an ongoing deficit of single-family units... and big tailwinds for multifamily real estate as homebuyers look for alternatives.

For thousands of Americans, multifamily housing may soon be the only available option. It's simply the reality of today's market.

I'm not saying it's good or bad... But it's changing the landscape of housing in America today.

My aunt's story is just one of thousands more to come. And this trend is unlikely to end anytime soon.

Good investing,

Vic Lederman

Further Reading

Low inventories and high demand have turned the usual stress of buying a house into a nightmare. And media headlines are calling this the end of the housing boom. But history tells us a different story... Read more here: Today's Hated Housing Market Is a Far Cry From 2005.

Today's housing market isn't the most affordable it's ever been. But this statistic tells us that it isn't too expensive for buyers yet. And that means we could see housing boom through 2022... Learn more here: One Chart Proves Housing Can Soar in 2022.

Market Notes
IT'S A BULL MARKET IN STEEL

Today’s company tells us the economy is humming along…

DailyWealth readers know we like to check in on real-world “bellwethers” to gauge the health of our economy. For example, when shipping companies are doing well, it means folks are buying lots of goods. And when construction and industrial companies are thriving, it means people are building and investing in infrastructure. Here’s another example…

Steel Dynamics (STLD) is one of America’s largest steel producers. Its products are used in a variety of sectors, including construction, automotive, transportation, agriculture, and energy. And those sectors need more steel than ever… The company shipped a record 11.2 million tons of steel in 2021, bringing in record sales of $18.4 billion – up 92% year over year. The company recently authorized an additional $1.25 billion in share repurchases and increased its dividend by 31%.

As you can see, STLD shares are up roughly 160% over the past 18 months, including dividends. And they just hit a fresh all-time high. This industrial giant’s success is a clear sign our economy is growing stronger today…