There's another housing problem which maybe sounds ironic but I would argue that due to land costs, and tastes.. new housing in general is "too nice" compared to old housing. That is - the size, materials, appliances and finishes of housing have all got dramatically better in my 40~ year lifetime. No one builds utility housing anymore, its all aspirational.
So for example, my parents & in-laws live in SFHs worth like 300k built in 1970-1990 era. The problem is that anything of comparable size built in the same town or neighborhood since is now going for 800k (literally across the street even). There is no cash-out downgrade for them to move to a townhouse and put there underused homes on the market. They weren't building said townhouses 30-50 years ago, so all available ones are newer and thus .. too nice. Why would you move to a smaller place for same/more money which also has some monthly HOA/condo fees?
My first NYC apartment didn't even have a dishwasher or full sized fridge. I didn't have an in-unit washer/dryer until I was 35, and it was small/bad. Meanwhile it's interesting seeing the expectations of GenZ moving into apartments with their first job that are finished like the nicest apartment I ever lived in. Then they complain about cost? I can still find my old crappy apartment on street easy, and its rent is only up 50% in 20 years which given wages seems fine. Kids are moving to shiny finishes new rentals in Bed-Stuy for more money rather than enduring the indignity of living north of 96th street in a 2nd floor walk up.
Everything but size is an extremely marginal cost compared to construction labor, and size is determined by what local zoning will allow. That is, more often than not, nothing but single detached homes on large lots, which makes it pointless for a builder to not maximize size while they've already got labor on site.
This is an interesting point that I’ve seen play out as you described. It was the parents of an acquaintance of mine, and they did choose the downsize option because they were getting too old for the upkeep of a whole house and niceties it brings such as having the hotel like amenities of a doorman. Then there’s the point of choosing new vs. old stock, agreed there is a higher demand, thus it demands higher cost.
Further - because it’s easy & cheap to stay in a paid off SFH indefinitely, a lot of retirees do so.
Part of it is inertia and part of it is stuff like “where will the grandkids stay if I moved to a condo”.
Which sure if your monthly costs are near $0 then having 2-3 spare bedrooms sit empty 360 days per year seems sensible.
If they could cash out 50% of their homes value and have same/lower monthlies, then losing some spare bedrooms wouldn’t matter.
Downgrading has to be both easy and cost saving for retirees to do it.
Between my dad and his 3 siblings only 1 has done the downgrade-after-70 thing. And even then that aunt only did so as a gift to her son selling them the family home below market …
I mean, if there's restricted supply/excess demand then the ones at the margin moving the point where supply and demand cross will the ones willing to pay high prices.
It shouldn't surprise anyone who took econ 101 that new builds are appealing to the ones at the margin of buying or not buying, and that those people are way above the median income right now.
Yes, as long as there’s a shortage of housing no one is going to build “utility” (read low-profit) housing when you could build high-profit “luxury” housing.
Imagine you have a development company that is restricted to building one building a year instead of five—what would you build? The kind that makes you money. People forget each project is risky for the builder.
Even mid-profit is selected against in an intense shortage.
So for example, my parents & in-laws live in SFHs worth like 300k built in 1970-1990 era. The problem is that anything of comparable size built in the same town or neighborhood since is now going for 800k (literally across the street even). There is no cash-out downgrade for them to move to a townhouse and put there underused homes on the market. They weren't building said townhouses 30-50 years ago, so all available ones are newer and thus .. too nice. Why would you move to a smaller place for same/more money which also has some monthly HOA/condo fees?
My first NYC apartment didn't even have a dishwasher or full sized fridge. I didn't have an in-unit washer/dryer until I was 35, and it was small/bad. Meanwhile it's interesting seeing the expectations of GenZ moving into apartments with their first job that are finished like the nicest apartment I ever lived in. Then they complain about cost? I can still find my old crappy apartment on street easy, and its rent is only up 50% in 20 years which given wages seems fine. Kids are moving to shiny finishes new rentals in Bed-Stuy for more money rather than enduring the indignity of living north of 96th street in a 2nd floor walk up.