Real Estate: Sales are down and the housing crisis is very real

French notaries have just published the number of transactions for the last twelve months and their short-term forecasts. They saw, halted before the start of the school year, a decline in existing home sales approaching 17% during the rolling year, suggesting an effective decline of closer to 20% at the end of 2023, if not further: the second half and last quarter marked even more significantly stronger deceleration. In the end, the notary is planning 850,000 to 900,000 operations in 2024, compared to 1.2 million in 2022. In short, like many observers, they believe that next year will be worse compared to last year. And like many exegetes in the real estate community, they analyze that 2022 was an exceptional year. President Guy Hoquet, a respected professional, used an even clearer expression: we were in the market of convenience and we are returning to the market of necessity.

In many ways, this opinion may seem unfounded. We might suspect it at first, without necessarily having any conscience on the part of those who bear it, of wanting to justify the painful situation a posteriori in order to soften its harshness. Above all, we can doubt the two postulates of the supporters of the return to the normal thesis: the definition of need, presented here in the most rustic way, and the logic that would lead to the transaction.

The five main reasons for changing accommodation are known and eternal

Need is understood as detached from any hedonism, brutal in its own way, even if it seems to be a happy thing. The five main reasons for changing accommodation are well-known and eternal: birth or death, the formation of a couple or their separation, and finally professional mobility. Let’s put aside a segment of the market that is clearly out of need, the segment of second housing: we will take the admissible hypothesis that we can live without a vacation. The opposition of need and convenience is a simplification that results in need being considered at the opposite end of the spectrum to pleasure. In the same vein, we heard from the president of Century 21, another specialist, who predicts that households will continue to buy despite the drop in prices.
purchasing power by reducing the area or choosing a less flattering location. This understanding of need and how we satisfy it is of course permissible, but we recognize that it is incomplete.

More space may be needed. It will be argued that it is better to live than not to live. The difference is slight: a newborn can sleep in the parents’ room without any problems… Intimacy will be affected, but not strictly speaking life. You may also need more proximity to your workplace: accept an extra quarter of an hour of travel between your home and your office or factory, and even half an hour is acceptable without disturbing the great balance of his life. Questions of standing are addressed in the same way: does wanting a bath when you have a shower reflect a need or a luxury desire? Do you wish for a bigger garden, better exposure, more light, an elevator to the third floor, when the stairs lead there just as efficiently, in which categories of wishes should you put these criteria, which are also subjective? The last one is the best illustration because it is really the deciding factor for most buyers. A booming household should take into account that taking the stairs will keep you fit… and yet they won’t see things that way! Perhaps he will also foresee situations in which the staircase is prohibitive: the reception of a person with reduced mobility, even if temporarily limited, with a cast leg, pregnancy, trying illness.

The list of situations is endless, showing the gap between need and convenience, even on a financial level. A person who has lost their spouse, even if they had the means to stay in the matrimonial home, may want to change their accommodation to break with the past and mourn it more easily. A couple whose children have all left the family home may consider their house too large and even morally consider that it should be used by a young couple with young children or maternity plans. As for rental investment, apart from being necessary to meet the needs of tenants, it is also important for the allocation of household savings: the French are often criticized for saving too much because they do not understand that investment is also on the productive side. need.

It is very difficult to distinguish between an urgent need and a relative need. We can even consider her a bit authoritarian. We are not making the same mistake as the government, which excludes individual houses from accession aid on the grounds that they are not easily compatible with land conservation and that the time has come to divert them to the heart of cities and dense built-up: quoting Jean-Paul Mattéi, representative of the finance committee for housing policy, commercial notary, what right do we have to tell the French where and in what they should live? Only they know what they need. Precisely in 2022, when interest rates certainly allowed it and access to credit was easy, 1.2 million French people felt they had to sell their property, and just as many felt they had to buy their first or new one. This is because the needs of our compatriots were at this level. The conditions allowed them to do so, but they did not create the need. They catalyzed it to the max.

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Have we ever seen someone come home and tell their wife that they can take out a €500,000 loan together and that they should think about changing their accommodation? Or that prices are rising and we need to immediately take advantage of a situation that is about to become tense? Without the dictatorship of life events, neither transfer nor acquisition. All this to say that it is wrong to settle for a lower number of residential transactions. 800,000 or 900,000 operations per year correspond to the pathology. Earth needs more, much more, to breathe. This is all the more true since the production of new housing has been declining for several years. The replacement of housing within the existing stock will need to be smoother and faster to partially offset the slowdown in the construction and provision of new housing.

Because of this, the hope is that prices will sort out acquisition candidates faster than they do and fall further. As the High Financial Stability Board will have to stop paying lip service, now with weekly entreaties from one of its most prominent members, the governor of the Bank of France – who is ordering credit institutions to dole out more credit, or who is calling for strong credit broker action, to examine the reasons for the refusal of credit -: it is urgent to relax the criteria imposed on banks so that the needs of households can find answers.

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