Is a Housing Shortage Coming?
Some experts are saying that the next big real estate problem could be a shortage of homes.
Only 672,000 new homes were started in April. That’s less than half the number needed to meet the country’s average population growth.
In the past, an average of more than 1.3 million households have been built each year, creating demand for 1.5 million new homes. In 2009, only 398,000 new households were formed, according to the Census Bureau.
“The decline in household formation is artificial,” says James Gaines, a real estate economist with Texas A&M. “The young are moving in with their parents. There’s even doubling up among working-class people. There’s a pent-up demand coming if and when the economy recovers.”
Some economists believe this analysis fails to take into account the changing economy or the large inventory of vacant properties. But Gaines and others say these factors are unlikely to significantly drive down demand.
Jobs Key to Housing Recovery
Some recovery in the labor market and record low mortgage rates could help offset some of the pressures on the housing market, according to a new study released by the Joint Center for Housing Studies at Harvard University.
“Right now, economists expect the unemployment rate to stay high, but if employment growth surprises on the upside or downside, housing numbers could too,” Eric Belsky, executive director of the center, said in a statement.
Home owners’ level of debt relative to equity stood at a record 163 percent at the beginning of the year, and housing costs have become a severe burden for more borrowers, the center adds.
A Real Estate Recovery in 2013
Economists speaking at the recent annual meeting of the National Association of Real Estate Editors said the housing market likely will not recover until 2013.
Stan Humphries, Zillow chief economist, said home prices continue to decrease, and he sees the “tremendous amount of shadow inventory” delaying recovery. “We think the market will be flat in nominal terms for three to five years,” remarked Humphries. “We are not going to hit bottom and see a V-shaped recovery.”
Meanwhile, Fannie Mae chief economist Doug Duncan said it will be another three years before new household formation and housing starts pick up. Duncan believes home prices will fall another 1 percent to 3 percent before bottoming out in the third quarter.
Both Humphries and Duncan said the federal home buyer tax credits shifted demand so that buyers took action earlier than they would have otherwise. “We’re going to see a payback in July and August,” noted Humphries.
More People Are Choosing to Rent
More than 76 percent of people say they would prefer to rent a home than buy one, up 5 percent from 2009, according to this year’s survey from the National Apartment Association.
The survey also calculated that 60 percent of renters plan to continue renting in 2011, with only 12 percent planning to buy a home in the next year.
Some 64 percent of renters cited having no responsibility for major repairs or maintenance as the primary reason they prefer to rent, followed by 33 percent who cited not being impacted by an unpredictable real estate market or susceptible to foreclosure.
Comfortable Laundry Rooms Are a Must-Have
Convenient and comfortable laundry rooms are an increasingly popular feature among home buyers.
Tom Byrne, president of Rockville, Md.-based Chadsworth Homes Inc., says they are more popular than such features as studies and media rooms.
“In the past few years, 30 percent of the homes we build … have a laundry room with granite countertops, a single-level kitchen-style faucet, and the laundry tub will be an undercounter sink,” Byrne says.
Stephen Melman, director of economic services for the National Association of Home Builders, concurs.
“These rooms are becoming larger and more multifunctional, with organizers, a table for folding, ironing stations, and windows with a view,” Melman says.
