The Creaking Floorboards Under America’s Housing Market

The Creaking Floorboards Under America’s Housing Market
Paul Allison, CFA

3 months ago1 min

Mentioned in story

With wildfires becoming commonplace, it’s increasingly puzzling why the US still relies on flammable wood to build houses. It’s one of the only advanced countries that still does so. There’s another issue too: durability. American homes (with their flimsier foundations) last an average of just 80 years before they’re torn down and rebuilt.

This chart shows the average age of existing US homes. And it’s been moving sharply higher over the past few years – a trend that’s expected to continue. By 2026, some 24 million homes are expected to be approaching middle age, and many of those will surely be in need of a bit of nip and tuck. That’s good news for home improvement retailers like Home Depot and Lowe’s, and for suppliers of all kinds of residential building materials (think: roofing, insulation, flooring, paint).

Or, at least, it should be good news for those players. The problem is, dramatically higher financing rates have put the skids on renovation loans and new-home construction. And sky-high mortgage costs mean that fewer people are exchanging keys on existing homes. All that softening housing demand is dragging down investor sentiment for the likes of Home Depot and Lowe’s, whose stock prices have fallen way behind the broader market this year.

But there’s a light at the end of the subdivision: the growing gap between housing demand and supply will have to be closed at some point with more construction. That, and all those creaking existing homes might just be an opportunity for long-term thinkers.

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