The Marshall Reddick BlogU.S. Housing Market Finally Reaches a ...

Paraphrased by Scott Pastel

A major study published on June 02, 2012 by RISMEDIA announced that improvement in the housing market will have positive impacts in the next couple of years across the US as well as international markets. The study was conducted by the Demand Institute, a nonprofit organization designed to predict where consumer demand is headed around the world.

According to the study, consumers will increase spending on buying, renovating furnishing, and maintaining their homes. The report also predicts that home prices will increase up to 1% in the second half of 2012, up to 2.5% by 2014 and as much as 4% a year from 2015-2017. It?s important to note that this increase will not be consistent across the country, and some areas could experience gains of 5% or more in the coming years.
Louise Keely, Chief Research Officer at the Demand Institute stated that ?In these initial years, the prime driver of recovery won?t be new home constructions, but rather demand for rental properties.? It is said that about $7 trillion in American wealth was wiped out when home prices fell 30% after the burst of the housing bubble. But as the U.S. housing market strengthens, almost ever consumer-facing industry will be impacted in the coming years, according to Mark Leiter, Chairman of the Demand Institute.

Key Findings in the Report:

1) The recovery will be led by demand from buyers for rental properties, rather than, as in previous cycles, demand from buyers acquiring new or existing properties for themselves. More than 50 percent of those planning to move in the next two years say they intend to rent.
2) Young people?who were particularly hard hit by the recession?and immigrants will lead the demand for rental properties. Developers and investors will fulfill it, developers by building multifamily homes for rent and investors by buying foreclosed single-family properties for the same purpose.
3) Rental demand will help to clear the huge oversupply of existing homes for sale. In 2011, some 14% of all housing units were vacant, while almost 13% of mortgages were in foreclosure or delinquent?increases of 12% and 129% respectively over 2005 levels. It will take two to three years for this oversupply to be cleared, and at that point home ownership rates will rise and return to historical levels.
4) The housing market recovery will not be uniform across the country. Some states will see annual price gains of 5 percent or more. Others will not recover for many years. The deciding factors will include the level of foreclosed inventory and rates of unemployment.
5) There will also be vast differences within states. Here, additional factors count, such as whether local amenities, including access to public transport, are within walking distance of homes.
6) The average size of the American home will shrink. Many baby boomers who delayed retirement for financial reasons during the recession will downsize. They will not be alone. The majority of Americans have seen little or no wage increase for several years, and many will scale back their housing aspirations. The size of an average new home is expected to continue to fall, reaching mid-1990s levels by 2015.
7) Consumer industries including financial services, home furnishings, home remodeling will all experience shifts in demand and new growth opportunities. Part of this spending is linked to increases in wealth from improving home valuations, while an even bigger part is tied to the ?transaction? of buying or selling the home which sets in motion increased demand for a wide range of products and services.
8 ) Despite the number of Americans who have been hurt financially by the housing crash, the desire to own a home remains strong. We do not expect to see a long-term drop in ownership rates. Indeed, one survey has revealed that more than 80% of Americans recently thought buying a home remained the best long-term investment they could make.

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