01/23/24 08:55 AM EST

Broadening Affordability Crunch in Homeownership

Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

The chart provides a visual representation of the new privately owned housing units under construction over the past several decades, contrasting single-family units with those in buildings with five units or more. From the data, we can observe significant trends in housing construction that align with demographic and economic shifts.

Since 1980, the median age of first-time homebuyers has increased from 29 to 35 years old. For repeat homebuyers, the median age has risen even more sharply, from 36 years old in 1980 to 58 years old in 2024. In other words, first time homebuyers today were the same age that homeowners in the 1980s were buying another home. This shift is indicative of broader socio-economic changes, including delayed milestones such as marriage and family formation, as well as the impact of financial constraints like student debt and of course affordability.

Existing home sales are below the levels seen in 2008, this makes new construction a more attractive option for potential buyers. The median existing home price has risen by 4.4% year-over-year to $382,600, which is contributing to the lower sales in existing homes as buyers may be priced out of the market.

Inventory levels are running 40% below their historical average, exacerbating the housing affordability issue. This shortage in supply is likely contributing to the rising prices and making it more challenging for first-time buyers to enter the market.

In summary, the chart and the accompanying data underscore the ongoing challenges in the housing market, with significant implications for affordability and the accessibility of homeownership, particularly for first-time and repeat buyers. The rise in median age of homebuyers reflects deeper demographic and economic trends, and while new construction presents an opportunity, the market's dynamics continue to pose barriers for many aspiring homeowners. We have a broadening affordability crunch.

Learn more about the Market Situation Report written by Tier 1 Alpha.