The Great American Housing Dream or Horror?
History classes are usually loathed by students and stands right next to math when it comes to the least preferred subjects (or was it just me?) — I mean, who in the right mind would like to learn about the Mongols & Genghis Khan or the American Civil War with all those pre-historic dates/events to be mugged up. All this plus the fact that each country creates its own biased version of events and history just gets distorted!
But if only history could teach us something, it should be the fact that there are NO FREE LUNCHES in this capitalistic society!
The term “American Dream” was apparently coined by historian James Adams in 1931 and he was referring to “That dream of a land in which life should be better and richer and fuller for every man, with opportunity for each according to his ability or achievement.” Politicians/Marketers conveniently started using this verbiose to mean American Dream = Owning a Home!
Just a decade ago, we had one of the biggest myths about this Great American Dream busted — when the housing bubble burst and people realised that owning a home or two even if you can’t afford it was a bad idea! Many of us learned that investing in a home is not the right way to build wealth. Just to refresh our memories, more than 20 million foreclosures were filed and close to 7.3 million consumers lost their homes.
But as they say, apparently we humans never learn from our past! Or do we?
All major home builders reported stellar numbers this past quarter (as given below) as the real estate recovery that started late last year is picking up steam. Average selling prices, is almost inching closer to the highs of 2006, and whether Fed’s QE tapering ends or not, consumers seems to regain their lost confidence as job numbers, equity returns, and overall economy is back in shape and the inflation animal is still tamed.
But what caught our fancy was an announcement from Lennar Corporation’s subsidiary about a new offer — that of paying off student loan debts of millenials in order for them to buy their “dream” home. What this means is, you swap your income-based, deferrable, flexible, federal backed student loan to a no-holds barred mortgage loan! I say — run run run!
Millenials, who could possibly be the biggest homebuyers for the housing boom to reach new highs, are faced with unaffordability and high student loans and are rethinking home ownership and homebuilders are offering “easy money” to lure them in.
Will they take the bait? Interesting times are ahead. Wall St. however is happy with the housing revival and home builders’ stock moving up substantially in the past one year.
Lennar’s Revenues jumped 15% and Average selling price increased 4% to $375,000!
KB Homes’ Revenues grew 25% and Average selling price increased 12% to $411,400!
Toll Brothers’ Revenues grew 18% and Average selling price decreased 6% to $791,400
This story was originally published as part of AlphaNews newsletter that went out at 5am ET today. Subscriber to our newsletter for more such insights.
