The Economy

I saw something a while back. ... Lennar was doing a development with really small homes and they were essentially marketing the development like a trailer park. Which made me wonder about the construction itself, but I never really looked closely at exactly what they were selling beyond the fact that they I think they were homes for $200K and less.

Let's say it's a $175K home. ... if they are selling new construction at that price with where costs are now, I'd be really suspicious about what I was getting, quality-wise, development wise. ... putting aside that you're getting only a 600 square foot home, for which there is always going to be limited demand.

At the same time, I get why there might be a market for them, with so many people being priced out of anything else. People are desperate.

The big potential problem is. ... what if there is a multi-decade housing bubble of epic proportions that grew because of distortions in the credit markets due to rates being fixed for so long. ... and the people who created those conditions are forced to let it finally fix itself and correct the mess they made (with the pain that will entail)?

If that happens. ... the demand for those homes will crater and the values could drop from even $200K (or whatever they go for). That would be an even bigger relative hit for the kinds of people buying those homes than the kind of person who was able to afford to buy a $1 million home. They'll take a hit, too, but demand for their type of home might hold up better, and unless they leveraged themselves way beyond their means to put themselves in that home, the relative loss they will take won't be as significant to them as the relative loss is to a person who had to scrape together everything they could for the tiny home and doesn't have any cushion.

 

That Times article references the homes in Levittown, which isn't far from where I grew up. The original Levitt homes were 750 square feet, built for GIs coming back from WWII, but by the time I was growing up and had a bunch of friends living around there, most people had doubled the size of the homes, adding a floor or pushing out into their lot.

From what I understand those are $500K to $750K homes now. It's convenient to Manhattan, an easy commute to Penn Station by train, and location drives real estate prices. But still, if you are familiar with the area and the type of home I am talking about. ...gosh, it feels like the world is upside down.