The Property Brothers, renowned for their HGTV renovation expertise, have issued a dire warning about the future of homeownership. During CNBC’s Your Money event last Thursday, Jonathan Scott, one half of the dynamic duo, predicted that young people will be completely shut out of the housing market within the next two decades. The culprit? A persistent housing shortage that continues to escalate costs.
Drew Scott, Jonathan’s brother and co-star, emphasized the profound impact of this housing shortage on the entire market. “I don’t think people realize this shortage of housing that we have affects everything – from the unhoused problem to the cost of housing,” Jonathan Scott stated to CNBC.
Current market data reinforces their concerns. The National Association of Realtors reports a nationwide shortage of four million homes, pushing median sales prices to a staggering $412,300 in the second quarter of 2023, according to Federal Reserve data.
The situation is further complicated by a growing disconnect between buyer expectations and market realities. According to Freddie Mac, over half of prospective buyers are holding out for mortgage rates to drop to 5.5%, while current rates for a 30-year fixed mortgage hover around 6.54%. This gap has contributed to a significant decline in existing home sales, reaching their lowest point since October 2010, with sales dropping to an annual rate of 3.84 million units in September.
The financial implications are particularly dire for first-time buyers, whose market share plummeted to 26% in September, marking one of the lowest levels on record. At current rates, a $400,000 home with a 20% down payment requires a hefty monthly mortgage payment of $2,031, according to NAR’s deputy chief economist Jessica Lautz.
Despite the bleak outlook, some positive signs have emerged. U.S. census data reveals a 2.7% increase in single-family housing starts in September, reaching 1,027,000 units. Additionally, more homeowners are listing their properties as they move past the “lock-in effect” created by the pandemic-era low mortgage rates.
While acknowledging the challenges, the Scott brothers remain optimistic about the long-term viability of homeownership. According to CoreLogic data cited by CNBC, U.S. homeowners with mortgages hold over $17.6 trillion in equity as of the second quarter of this year, reflecting an 8% increase from the previous year.
For those struggling to enter the market, the brothers encourage alternative approaches. “You have to think long-term,” Jonathan Scott emphasizes, suggesting that prospective buyers consider purchasing property with family members or friends to overcome affordability barriers.
However, the current trajectory of housing costs, coupled with persistent supply shortages, casts a shadow over the future of homeownership for generations to come. Without substantial changes to housing supply and accessibility, the Scott brothers’ prediction that young buyers will be priced out could become a grim reality.
