Population Projections and the US Housing Divergence

WSJ – Daily Shot: Pew Research – World Population Projections in 2100 07/30/19

Bloomberg – America’s Housing Affordability Crisis Spreads to the Heartland – Prashant Gopal, Reade Pickert, and Noah Buhayar 7/29/19

Low mortgage rates and thriving employment should be the recipe for a strong housing market. Instead, they’re deepening America’s affordability crisis.

What began on the coasts, in areas like New York and San Francisco, is now radiating into the nation’s heartland, as well as to cities from Las Vegas to Charleston, South Carolina. Entry-level buyers are scrambling to purchase homes that are in short supply, sending values soaring.

Expectations that the Federal Reserve will reduce interest rates this week will do little to change the sober reality: For many, prices have risen much faster than incomes, pushing homeownership out of reach for a new generation of hopeful buyers. That’s cooling the market, with the 2019 spring season shaping up as the slowest for sales in five years, according to CoreLogic Inc.

“All signs point to a housing market that should be doing really well and it’s not,” said Danielle Hale, chief economist for Realtor.com. “The No. 1 constraint, despite low mortgage rates, is that people can’t find housing that they feel is affordable.”

Recent months have shown a growing divergence between the high and low ends of the U.S. market. Prices in the bottom third jumped about 9% in June from a year earlier, compared with 1.1% growth for the top third, data from Redfin show. Meanwhile, sales for lower-priced homes plunged almost 20% as buyers struggled to find properties in their range, according to Zillow.

There are some signs of a pickup in the market. Contracts to buy previously owned homes rose 2.8% in June from the previous month, exceeding economists’ forecasts, the National Association of Realtors reported Tuesday.

Still, the outlook is particularly bleak for first-time buyers. The number of new homeowners created in the second quarter was the lowest since 2006, and just a third as many as a year earlier, the Census Bureau reported last week. Black homeownership fell to the lowest level since at least 1970.

The housing recovery that began in 2012 has been unequal from the start. About 6 million Americans lost homes in last decade’s crash and needed time to rebuild their credit. Private equity firms such as Blackstone Group Inc. swept in to buy foreclosed properties at deep discounts and rented them back to many of those displaced former homeowners.

Now those people are back in the market, along with the bulging population of millennials eager for their first crack at homeownership. But many of the properties they want have already been picked over. Builders have focused on wealthier buyers willing to pay bigger price tags, and now some areas have too many expensive homes, and not enough where they’re needed.

Affordable homes disappeared first in technology and financial hubs like Silicon Valley and New York, where buyers with big paychecks pushed up prices. Now values are flattening after many would-be homeowners have been forced to the sidelines. In some areas, demand has also been hit by a pullback in foreign buyers and new federal limits on property-tax deductions – as well as fears that a recession may be around the corner.

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