Jan 30 2015 10179 1

Dated: 01/30/2015

Views: 278

A basic lesson in economics teaches that levels of supply and demand point clearly to what prices consumers can expect before they even look at a price tag. When the desire to own a product is high, people are willing to pay a higher price-—but our Demand Index (and closings in many markets across the country) exposes a limit to this logic.

The American dream of owning a home is still very much alive—results of Gallup’s Economy and Personal Finance Survey revealed that seven in 10 non-homeowning adults aged 18 to 29 hope to own a home in the next 10 years. More significantly, 35 percent to 40 percent of non-homeowning adults of any age group who make less than $50,000 annually also hope to buy a home in the future. 

The rising cost of land, however—even in markets where lot supply isn’t as tight—directly affects prices builders charge for a new home. Yes, that's basic economics, but for the post-recession, non-homeowning American, the desire to own a home is trumped by a deep-seated fear of losing everything—a possibility the recession proved be a reality. Taking out a loan to buy a home beyond one's means feels more like Russian roulette than applying for a mortgage right now. 

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