This summer, the median price of existing homes eclipsed the median price of new homes.
Leading up to the pandemic, new homes were consistently $50,000 more than existing homes. If an existing home sold for $200,000, the new home would be $250,000; that's 25% more, and a considerable spread. Now, they are virtually the same price and trending counter to historic values.
What's the underlying driver for this inversion?
New home builders are building smaller homes. As mortgage rates rose dramatically, personal incomes didn't keep pace, and home buyers were forced to look at smaller homes.
Source: First quarter 2022 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis.
Homebuilders have many levers to pull regarding home affordability. They can dial back amenities and finishes. They can develop on cheaper land, typically a further drive from employment. But the easiest lever to pull is downsizing, taking a couple of square feet out of a bedroom, reducing the size of the garage, or eliminating a hall closet. Quartz countertops sell homes, and so do high ceilings and open kitchens. Buyers notice that a third bedroom is smaller or the closet is tiny, but these changes are overlooked or justified. As families grow and stuff accumulates, the lack of storage will impact a homeowner's quality of life and the home's functionality.
The average first-time home buyer is 35 years old, smack in the middle of the millennial generation. According to the Self Storage Association, 38% of all self storage renters are Millennials. They use self storage 2X more than baby boomers, who only make up 19% of storage renters.
These are the tailwinds that get us excited about self storage for the foreseeable future.