Recently, the Demand Institute division of the U.S. Conference Board released a study called “The Shifting Nature of U.S. Housing Demand: The U.S. housing market is growing again – but not as we knew it.” Among the broad conclusions are that rentals will be more popular, homes will be smaller, and most Americans still view home ownership as a good investment in their future.
The study’s findings not a total surprise
Increased demand for rentals is not a surprising result. Many homeowners who lost their houses to foreclosure will be forced to rent as they rebuild their credit. In addition, young adults have traditionally rented while saving for a down payment. In the real estate boom, some bought without down payments, sure; but new lending standards are requiring almost everyone to have at least a small down payment.
The Demand Institute expects the building industry to focus on multi-unit projects. This will meet some of the demand for rentals with apartments and smaller homes. Investors are likely to buy bargain-priced single family homes to meet additional demand for rentals.
The study’s authors noted that “people who rent their home tend to own fewer cars, so demand for neighborhood rental cars should rise.” In addition, prices in cities that have reliable and robust public transpiration systems and a number of attractions should be stronger than in less accessible areas.
New homes built today are expected to be smaller. The study expects that the average size of new construction will be about 2,150 square feet by 2015, down from an average of 2,500 square feet seen in the mid-1990s.
The report also noted that a Pew Research survey that found 80 percent of those surveyed still believe that buying a home is the best long-term investment they can make, and that’s following the home price crash they’ve experienced over the past few years. That’s an indication of continued demand for home ownership.
As for prices, the report is optimistic:
“The worst is over for most of the U.S. housing market. Between 2006 and 2011, house prices fell by more than 30 percent, wiping $7 trillion from the value of housing assets and leaving many Americans with untenably high levels of mortgage debt relative to the value of their homes.
The report goes on to mention that consumer confidence has now rebounded from historical lows and sales of existing homes have started to rise slightly. As a result, The Demand Institute projects that seasonally adjusted average house prices will rise by up to 1 percent in the second half of 2012, and continue to strengthen to an annual rate.
Holding on to a home could help a home owner enjoy this recovery. Now could be the time to consider a reverse mortgage rather than selling.