The
housing market has stabilized after one of its worst downturns in history and
choices made by 20- to 34-year-olds will profoundly affect future trends,
industry experts said.
Many questions remain regarding demographics, household
formation and consumer sentiment while housing finance reform presents a new
set of questions, the experts said in a Standard & Poor’s Ratings Services
report released Monday.
“Whether Americans return to prior living patterns
remains to be seen, but a large demographic shift toward youth could overcome
several factors that are leading to uncertainty, and this could bolster housing
volume and prices, supporting the larger economy,” the report said.
It also said, “Should rental housing remain as
prominent as it is, or gain even more favor, financiers of affordable housing
will need to tailor their products to meet the needs of their target
population.”
In the report, John Burns, CEO of John Burns Real Estate
Consulting, cited challenges for first-time home buyers.
“They need confidence that they’re not going to lose
their jobs,” Burns said. “I don’t know how we overcome that except
with time and more economic growth. They also have debt. The entry-level buyer
is really struggling with a lot of things.”
Burns mentioned, however, that a large number of potential
buyers exists.
“The number of people aged 20 to 24 is huge … So
there is a lot of pent-up demand for household formation, and it’s going to
unleash here sometime, it’s just predicting when,” Burns said.
In addition, 1.2 million more 25- to 34-year-olds live with
a parent, so housing decisions by younger people affect the housing industry
and, thus, the economy as a whole, the report said.
The report, “Unclear Demographic Shifts Create
Uncertainty In U.S. Affordable Housing,” highlights the discussions held
at a recent roundtable sponsored by Standard & Poor’s in
Many new households are tending to rent instead of own,
possibly because of a need for mobility given less job security or for more
time to accumulate the higher down payment now required for a home purchase,
S&P officials said.
Restructuring of government-sponsored entities Fannie Mae
and Freddie Mac could also influence future housing trends, the officials said.
