Housing starts are on the rise, everyone celebrate! We’ve been saying for years that the market will continue to choke out would-be homebuyers if permits and starts don’t improve, and we’re finally seeing a glimmer of hope, but unfortunately it’s pretty exclusively in the multi-family sector.

According to the U.S. Commerce Department, housing starts jumped 3.9% in August, beating economists’ expectations, with construction material pricing easing and allowing for more new builds. But again, the surge was led by multi-family (up a whopping 20.6% for the month), while single family housing starts actually fell 2.8%, and permits for that sector stagnated.

“There is certainly a housing shortage, as reflected in the low inventory of homes for sale and in low rental vacancy rates,” observed National Association of Realtors’ Chief Economist, Dr. Lawrence Yun. “However, a shift toward rental buildings means less access to homeownership over the long run and the accompanying opportunity for wealth gains.”

This summer, NAR called for lawmakers from local to federal to take “once-in-a-generation action” to address the housing supply crisis.

Now, Dr. Yun noted that “given the housing shortage and the lack of big increases in the construction of single-family homes, home prices will continue to move higher than most people’s income gains,” despite price gains skyrocketing 20% gains in the first half of this year.

“That’s good news for property owners,” said Dr. Yun, “but bad news for those wanting to become homeowners.”

In coming months, single-family housing starts are expected to slow, not just for seasonality reasons, but as a result of thousands of people trading in their city life for a suburban life as a reaction to a global pandemic.

Home builders’ permits are up 50% nationally compared to this time last year when supply chains were obliterated by COVID, and China’s real estate problems are not expected to have a strong ripple effect in housing stateside, although a temporary stock market retraction has been felt.

Homebuilder sentiment just rose for the first time in three months, according to the National Association of Home Builders (NAHB) which pointed to a rise in buyer traffic and (finally) falling lumber prices, which they said has added an average of $30K in cost to a new home in America.

“The September data show stability as some building material cost challenges ease, particularly for softwood lumber. However, delivery times remain extended and the chronic construction labor shortage is expected to persist as the overall labor market recovers,” said NAHB Chairman, Dr. Chuck Fowke.

Fear rippled throughout the global markets today as Chinese real estate conglomerate, Evergrande’s debt crisis comes to a head. Investors worldwide are panicked as the company is failing to manage their $300 billion in debt, and not only did they fail to pay their interest payments on its bank loans due today, they’ll miss their massive interest payment on its bonds (worth over $100 million) this Thursday.

Although the White House has emphasized that Evergrande’s business is “overwhelmingly in China,” a dip in one part of the global market is typically paid for by another area of the market. When America’s housing market crashed in 2008, the global market was universally impacted.

Even Bitcoin dipped roughly 9% today as investors retracted to safer waters.

Simultaneously, the market is stressed as worries loom that the U.S. Treasury could run out of cash by November if the debt ceiling is not raised.

Combine Evergrande with Treasury fears and seasonality (October tends to be the worst month of the year for stock markets), and investors are tense.

Experts indicate that Evergrande could undergo a restructure, and their physical assets could wipe some of their slate clean, but none of that happens overnight, and requires the Chinese communist government’s involvement. Meanwhile, investors fear a default on their billions of dollars of debt, and are reacting accordingly.

What does this mean for residential real estate in America? How does this impact your real estate practice?

Honestly, you won’t feel it in your daily life, but consumers are reading about the “Chines real estate bubble” and worrying that the market here will crash again, just like in 2008. Most adults in the market were around for that, even if they’re younger consumers, so the wound is still fresh.

You’ll be impacted because many consumers won’t read further than the headlines and will have questions for you about how today’s stock market plunge will impact housing here.

The answer is that Evergrande is a major real estate developer in China that is struggling and international investors got spooked, but the American housing market remains strong with the lingering challenges being tight inventory levels and insufficient housing starts. Not China.

Easy peasy.

We’ve written for years about millennials and their reluctance to purchase homes, especially in the wake of the pandemic. Financial hesitancy is a trait long associated with millennials, but according to Hana Ben-Shabat, Gen Z is making a definitive push for homeownership where the prior generation has stagnated.

Hana Ben-Shabat is the author of Gen Z 360: Preparing for the Inevitable Change in Culture, Work, and Commerce, and she founded Gen Z Planet, a firm that “[helps] brands prepare and adjust to the changes that Generation Z is bringing to the workplace and the consumer market.”

Her insight is clearly valuable, making her assertion that Gen Z is more likely to buy homes less speculation and more prophecy.

“Considering their focus on securing their future, home ownership is a piece of the puzzle,” Ben-Shabat says. In a related survey, she notes that 87 percent of Gen Z participants expressed interest in owning a home sometime in the future; only 63 percent of millennials echoed that sentiment.

Gen Z participants also had a stronger inclination toward viewing homeownership as a financially smart decision rather than a burden.

Gen Z’s open-mindedness toward purchasing homes may seem surprising at first glance. Ben-Shabat acknowledges the financial hardships placed on this generation, and posits that, having seen millennials struggle with student debt and the recession of 2008, this generation has arguably more incentive to stay away from large investments.

But she also points out that Gen Z buyers are “determined to learn from the mistakes of others and secure their financial future as early as possible,” adding that they “benefited from a wave of consumer financial education that began after the housing crisis of 2008.”

This makes for a generation that is both clear and educated regarding their financial goals and how to achieve them.

It’s also worth noting, as Ben-Shabat does, that millennials have a more tenuous grasp of DIY culture and the financial decisions that accompany it than their Generation Z counterparts. As “digital natives,” Gen Z buyers don’t object as strongly to purchasing starter homes and renovating; millennials, by contrast, find themselves purchasing more expensive properties that are “ready to move in” due to waiting an extended time before shifting toward homeownership.

Ben-Shabat’s observations foreshadow an increased market shift toward Generation Z ownership, especially in smaller, more affordable locations. As for the economic ramifications of the paradigm change, only time (and Ben-Shabat’s website) will tell.