Is the housing market exhibiting signs of a bubble akin to the 2006-2008 era?

When we reflect on a bubble, the context often reverts to the period between 2006 and 2008. That phase truly constituted a bubble with numerous investors buying multiple homes for flipping, leading to an oversupply. Presently, the scenario is starkly different. We lack an oversupply of homes, and the market primarily comprises individuals seeking new homes rather than extensive investor involvement. There’s a notable absence of investor-driven resale homes, and the fundamental economic factors of supply and demand are quite distinct, steering us away from the bubble experienced in the past. A slowdown in the sales pace might be more plausible. At Minto, our land portfolio is in balance, aligning with consumer demand without overbuilding.

Which asset classes have shown exceptional performance in the past year?

Across our residential spectrum, including brands like Latitude Margaritaville and 55-plus active adult communities, as well as family-oriented communities like Westlake, the performance has been commendable. However, at Westlake and other communities, despite high demand and strong sales last year, we’ve had to throttle down the sales pace. Escalating construction costs have caused this adjustment, leading to longer delivery times of 14 to 15 months—beyond our preferred timeline. This is a result of material price volatility and challenges in the labor market, limiting the number of homes we can produce. Consequently, we’ve implemented sales constraints. Despite the rise in home prices due to increased costs, the relatively favorable interest-rate environment has made mortgages still reasonably affordable, enabling buyers to access homes, albeit at higher initial prices compared to a year ago.

What’s your near-term outlook for the market?

Over the past eight to 10 months, we’ve witnessed record-breaking home sales. Looking ahead, we have a burgeoning backlog of sold homes set for closure in 2021. For 2020, we’ve sold all the homes scheduled for closure, and approximately 40% of our closings in 2021 are already sold and in backlog. Our goals for sales and closings in 2021-22 are poised to be met, if not surpassed.

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