Living in Arizona now for 7 years I’ve seen both the housing market crash and burn and bounce back in a huge way.   Between my house and my office, a 10-minute drive, there are now seven new subdivisions being built. In total that’s over 900 homes plus several apartment communities which will total over 600 apartments. I’m certain if you live in the US you are seeing the same thing in your local areas. My question is, who is going to live in all these homes and apartments? Where are they coming from and, just as importantly, what does that do to the housing market they are leaving?

US Department of Housing and Urban Development data

Let’s look at some national statistics from August 2019: 

• Purchases of new homes fell, after a large upward revision to sales the previous month. New single-family home sales decreased 12.8% to 635,000 units (SAAR) in July from an upwardly revised level of 728,000 in June—the highest pace since 2007.
• The inventory of new homes on the market rose. The listed inventory of new homes for sale, at 337,000 units at the end of July, increased 1.2 percent from the previous month and were up 7.3% year-over-year.
• Sales of previously owned (existing) homes reached a five-month high. The National Association of Realtors® (NAR) reported that July sales of existing homes (including single-family homes, townhomes, condominiums, and cooperatives) were up 2.5% to 5.42 million units (SAAR) from June’s upwardly revised pace of 5.29 million homes and were 0.6% higher than a year earlier. Sales were up in all Census regions except the Northeast
• Mortgage rates are near three-year lows. The 30-year fixed rate mortgage (FRM) reached an average weekly low in August of 3.55% the week ending August 22, down from July’s weekly low of 3.75% for three weeks in July. One year ago, the 30-year FRM was 4.52%. (Source: Freddie Mac)

According to a study by United Van Lines, this year the top 5 states people are moving to are:

• Vermont (34% for new job relocation and 31% for retirement)
• Oregon (47% for new job relocation and 22% to be closer to family)
• Idaho (34% for retirement an 26% for lifestyle change)
• Nevada (46% for new job relocation and 29% for retirement)
• Arizona (37% for retirement and 29% for new job relocation)

The tops states to see migration to other states are:

• New Jersey
• Illinois
• Connecticut
• New York
• Ohio
• Massachusetts
• Michigan

According to the study, “the most frequent reasons for leaving cited was either for retirement or to be closer to family.   All seven states posted population changes below the US average of 0.62% and New York, Connecticut and Illinois recorded population losses in 2018 according to Census data”So, where does this leave us? Well, it certainly seems like my home state of Arizona is going to fare well through this housing boom as many people are still flocking to Arizona for retirement. However, we need to be careful not to ignore disruptors before us, such as tariffs on items such as lumber, aluminum, quartz. All the things that go into new homes to make them attractive to new buyers may cost more which could increase the overall price of the homes.

Baby Boomers versus Millennials: who is moving and where?

In addition, we need to keep a close eye on who is moving. With rising student debt, can millennials afford a new home, even with a job transfer? Are enough people retiring to fill the number of homes being built?A quote from the Governance Studies at Brookings report “How Millennials Could Upend Wall Street and Corporate America,” states that Millennials will comprise more than one in three adult Americans by 2020 and 75% of the workforce by 2025.If 75% of the US workforce by 2025 will be Millennials and upwards of 10,000 Baby Boomers are retiring every day (a fact noted in a recent August article in Investopedia), we need to pay close attention to the ever-growing housing and construction markets.  

How should we be advising our clients and transferees?

• Should they buy or should they rent?
• Will employers have to adjust employment offers to be more enticing for positions in states experiencing high migration?
• Should companies consider policy changes to assist with additional rental assistance, increased or decreased temp living allowances. Maybe even offer more temp assignments rather than full relocation packages?

One thing is certain, in this housing and construction boom we need to be aware of the ever-shifting sand of the housing market. Let’s remain focused on this aspect of mobility with a keen eye. Understanding our markets and advising our clients and transferees accordingly will make us a stronger resource and trusted mobility professionals.

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Chamness WorldWide have been delivering personalised and high quality relocation services for over 30 years. Read their article about the differences between US and UK education: US public school vs. private school education for the expat child: a tipping point for a successful assignment

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