Sales of McMansions up 21%; remaining 99% of market down 7.6%

At least one statistic suggests the housing market is still split into two divided camps: one that is thriving and one that is not.

Consider this incredible statistic from the research analyst Redfin: through last April, sales of the McMansions of America – the top 1% of homes by price – rocketed up 21% compared to last year. But sales of the other 99% of homes were down 7.6%.

It’s not even clear that rising home prices – traditionally a way to measure a recovery – would be good for the middle class. Price increases harm the affordability of homes, particularly for first-time homebuyers, who have not returned to the market at their historical level. This is an important group: first-time homebuyers drive the entire market, allowing sellers to step up into bigger homes…

When prospective homebuyers are actually asked about their biggest obstacle to purchasing, a majority cites “rising home prices” and “quality of inventory”, meaning the lack of decent homes in the buyer’s price range. So it’s not surprising to see a drought in lending, and a reduction in homeownership rates from 69% in 2006 to 65% in 2014. It has nothing to do with bank regulation; it has to do with purchasing power.

In the words of senior loan officer Logan Mohtashami, “we simply don’t have enough qualified home buyers to have a true housing recovery in America.”

While I’m not sure that the top 1% of houses are all McMansions – the term tends to refer to certain styles of homes rather than just the price – the data seems fairly consistent in recent months: the housing market has not fully or evenly recovered. More expensive homes are hot as are particular locales, such as luxury condos in New York and Miami. The slump continues at the lower end of the market where builders aren’t that motivated (why build cheaper housing units when there are bigger margins on those luxury units?) and potential homebuyers don’t have the savings to move in or up and also may still be trapped in their current mortgages.

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