Why aren’t people buying new homes?

Today’s hand-wringer-of-the day is this one:

New-home sales drop to record low in January.

It’s dire, indeed. The economy depends on people wanting another house than the one they’ve already got, then buying all the junk they need to fill it up, running out of room, and then buying a bigger one, filling it with more stuff, and keeping the economy going.


New-home sales for all 2009 fell almost 23% to 374,000, worst year on record. The National Association of Home Builders is forecasting that sales will rise to more than 500,000 this year, an improvement from 2009 but still far below the boom years of 2003 through 2006, when builders posted more than 1 million new home sales each year.

The unexpectedly large drop in January activity will increase concern that the housing rebound could falter in coming months as the government withdraws the support it has used to try to bolster the housing market, which stood at the epicenter of the country’s overall recession, the worst downturn since the 1930s.

That’s the problem with most economics reporting. It’s all numbers. And clearly there are people who need new and bigger, especially in the Midwest for some reason. But what if there’s the beginning of a bigger sociological change going on? What if the recession has been — in some small way — a well-deserved slap upside the head? What if we realize we don’t need a bigger house? What if we don’t need to change school districts? What if we realized part of our problem isn’t that we don’t have a big enough house, it’s that we have too much junk?

Last year, the Pew Center seemed to confirm this.


The question testing whether Americans judge specific consumer goods to be luxuries or necessities has been asked over many years by different polling organizations, beginning with the Roper Organization in 1973. A review of the results over time shows a noteworthy pattern: On many of the items tested, the public’s current “necessity” judgments have retreated to levels not seen for a decade or more. And on virtually every item for which a trend is available, the 2006 results represented a high-water mark in the necessity rankings. (Perhaps not coincidentally, 2006 was also the year before the recession set in and marked the outer limits of America’s housing bubble.)

For example, two-thirds (66%) of respondents in the latest survey consider a clothes dryer a necessity. That’s down from 83% in 2006 but nearly identical to the 69% who said in a 1983 Roper survey that a clothes dryer was a necessity. Similarly, about one-in-five rated a dishwasher as a necessity in the latest survey (21%) and in 1983 (19%) — a double-digit decline from the 35% who said three years ago that a dishwasher was essential.

Maybe economic reports are telling us we’ve learned to be happy with what we’ve got. If so, can an economy survive that mindset?

  • kennedy

    I would be interested to know what existing home sales look like. Maybe the economy is still working on getting all those foreclosed homes occupied.

    A lot of property was developed earlier in the decade based on the bubble. Maybe previous overdevelopment is reducing the need for new construction.

  • Brian

    Housing sales will not bounce back until there is certainty about the economy +10 years from now. Health care and tax laws will stymie future home sales.

    We have learned to do with less and will continue to do so because it’s the prudent thing to do.

    The cost of housing as a proportion of income is up and makes it difficult for young couples to get started.

    I’ve encouraged my daughter and her husband to learn how to live on one income (I have for years with my family) and pay cash or a stubstantial down payment toward a house.

  • John

    I know two young families who are “upside-down” or close to it on the homes they currently own. They can’t leave the one they have, because they can’t sell it for what they owe and have a decent down payment left over. They want a larger house, due to growing families, but it just can’t be done.

  • Tyler

    We need to start burning down existing homes to create demand? How can we do this? Have gas companies “inspect” existing gas lines, that’s how…

  • http://www.fischerandfrichtel.com ElizabethL

    I’m not sure that people who are purchasing big homes in the midwest desirve a “slap in the face.” If they’re buying bigger homes they can afford them, that’s why they’re upgrading. The problem now is foreclosures – people who can’t afford new homes. The midwest is one of the best areas in the housing market according to forbes.com. Check it out.