Survey: Many Still Believe Housing Recovery Still Three to Five Years Away

REAL ESTATE TOPICS

In a quarterly survey of more than 100 real estate experts and economists, real estate data firm Zillow found 40 percent of respondents believe it will take another three to five years for the housing market to normalize, based on current home price trends and homebuyer activity.

Nearly a third of panelists took a more optimistic view, predicting the market will stabilize one to two years from now, while one in five responded that housing has either already returned to normal or will within the next 12 months.

When asked about headwinds facing the market right now, respondents pointed to low household formation rates, which have been stymied in part by a challenged economy. According to another recent study from Zillow, more than a third of adults living in the U.S. were living with at least one roommate as of 2012, up from a quarter in 2000.

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While those renters represent millions of potential new formations in the years to come, they remain stuck where they are as jobs and wages slowly grow.

Demographic issues are also at play, Zillow reported. While more millennials seem to be holding off on major commitments—including homeownership, marriage, and parenthood—a growing number of Americans nearing retirement age are also opting to stay in their homes longer, keeping the nation's housing inventory from making any meaningful recovery.

"We've reached a point in the recovery where the only real cure-all is time," Zillow Chief Economist Dr. Stan Humphries said. "[T]he landscape is slowly changing, as incomes begin to grow, negative equity fades and new households start to form. These shifts won't occur overnight, but they are happening. Patience will be a virtue over the next few years as we wait for these traditional fundamentals to more fully take hold in the market."

Millennials still grapple with first-time homebuying

REAL ESTATE TOPICS

Realtors: Demographics still weighing on housing

Trey Garrison

November 10, 2014 3:28PM

Realtors from across the country gathered today to discuss the effects of changing homebuyer demographics on the housing market during the Realtor University Richard J. Rosenthal Center for Real Estate Studies forum at the 2014 Realtors Conference & Expo.

“Among primary residence homebuyers, the demographics have shifted dramatically, especially among first-time homebuyers, whose share of the market has dropped to its lowest level in decades,” said Jessica Lautz, director of member and consumer survey research for theNational Association of Realtors. “We have also seen an increase in the median age and income of the average buyer, as well as in multigenerational household formations as adult children and elderly family members move back in with their families.”

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Adult millennials, those aged 18 to 33, were a popular topic of discussion for the panel.

In 2014, millennials saw 60% better job growth than the U.S. overall and a drop in unemployment to 6%. This growth, along with improved economic opportunities, should encourage millennials to form households and buy homes in the coming years.

"Millennials are the largest generation of people in the U.S. and represent 60% of first-time homebuyers,” said Jonathan Smoke, chief economist for realtor.com. “They are also more likely than any other group to purchase a home in the next year."

Tightened inventory, difficulty receiving credit and lower-than-average salaries have kept many of these buyers out of the market, but most economists see that as a temporary setback.

"It's not that young people don’t want to purchase homes, it’s that they are delaying the purchase," said Lisa Sturtevant, vice president of research for the National Housing Conference. "Many of the reasons millennials are not forming households or making purchases are economic, so as the economy improves, we should see this group become more of a force in the housing market."

Smoke said it’s a misperception that millennials are not already participating in the market.

“They represented 37% of home shoppers this summer, and over the next five years this generation will make up two-thirds of household formations," he said. "Between June and September 2014, over half of adults aged 21-34 visited real estate websites or mobile apps. And this is the cusp—get ready for the millennial wave to drive the housing market for decades."

Another group that will be competing with millennials for dominance in the housing market is baby boomers. Sturtevant said, "With millennials searching for new homes, baby boomers downsizing, and groups with historically lower incomes all entering the market, an increased demand for smaller, less expensive homes will begin to emerge."