Harvard University’s Joint Center for Housing Studies released its annual State of the Nation’s Housing report for 2012 and, according to NAR’s Speaking of Real Estate blog by Robert Freedman, it very closely tracks comments made by NAR Chief Economist Lawrence Yun earlier this week at a CRE conference on what’s holding back the housing recovery.
According to Freedman, the Harvard report points to increasingly strong market fundamentals and says home sales really could see serious improvement this year.
The main weakness is tepid job growth, which Yun also mentioned. The overhang of distressed properties is also a continuing problem.
Other issues include the unusually slow pace at which young people–the Echo Boomers—are leaving their parents’ homes and forming their own households. That’s a big missing link in home sales growth, and it’s certainly related to the weak job picture. Unless young people feel confident about getting a good job, they’re going to remain hesitant to start a new household.
The big beneficiary of the last several years has been the multifamily housing sector, which Freedman describes as “booming.” As the report puts it, “the number of renters surged by 5.1 million in the 2000s, the largest decade-long increase in the postwar era.” More rental growth is expected.
It’s in part because of this rental growth that homeownership is poised to improve. The Harvard report underscores how much more affordable mortgage payments have become relative to rental rates. At some point, renters are going to realize they’re losing money each month they continue to rent.
Another interesting point made by the report is the critical role older homeowners have played in preventing the U.S. homeownership rate from falling more than it has over these last few years. The rate today stands at about 66 percent, which is about 2 percent lower than it was a few years ago. Households 65 and older are the only age cohort that has continued to increase its share of ownership; all of the others, including the important middle-aged move-up cohort, have declined.
Source: Robert Freedman, Speaking of Real Estate Blog, the National Association of REALTORS®
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