Demographics will play a major role in the strength and length of the housing market recovery. Those bullish on housing expect the rebound to last for several years because new-home construction and household formation fell during the downturn even though the U.S. population continued to grow.
As more young adults move out of their parents’ homes, they will seek apartments before achieving homeownership, and those who put off buying a home during the recession are now ready to make purchases.
Even after taking the so-called shadow inventory into account, the bulls say more housing units need to be built. Zelman & Associates calculates that 14 million additional housing units are needed this decade to accommodate population growth, but only 5.7 million will be built by 2015.
With another 2 million homes per year needed during the last four years of the decade, analysts believe the economy will reap the benefits of increased construction.
Ivy Zelman of Zelman & Associates says, “If you were waiting for homeownership rates to improve, you would have missed the housing recovery. It’s all about occupancy and shelter.”
Meanwhile, the bears believe tighter credit standards, higher consumer-debt levels and too much of a reliance on investors mean the housing recovery will be short-lived, though gains in housing will spur economic growth.
They believe many Americans will find it difficult to obtain mortgages because income growth has stalled and they carry too much debt. First-time buyers with a lot of student loans could be hit the hardest.
Joshua Rosner of Graham Fisher & Co. adds that there must be “a handoff from the investor purchase to the primary-resident purchase” at some point, and observers believe this will determine which side proves most accurate.
Source: Wall Street Journal (06/10/13) P. A2; Timiraos, Nick
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