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Harvard: Home Sales Finally Poised to Improve

Harvard University’s Joint Center for Housing Studies released its annual State of the Nation’s Housing report for 2012 and it very closely tracks comments made by NAR Chief Economist Lawrence Yun earlier this week at a CRE conference on what’s holding back the housing recovery.

The Harvard report, which always does a good job laying out in plain language what’s happening with the market, points to the increasingly strong market fundamentals and says home sales really could see serious improvement this year.

The main weakness is tepid job growth, which Yun talked about as well earlier this week. The overhang of distressed properties is also a continuing problem.

Other issues include the unusually slow pace at which young people today–the Echo Boomers—are leaving their parents’ homes and forming their own households. That’s a big missing link in home sales growth, and it’s certainly related to the weak job picture. Unless young people feel confident about getting a good job, they’re going to remain hesitant to start a new household.

The big beneficiary of the last several years has been the multifamily housing sector. It’s booming. As the report puts it, “the number of renters surged by 5.1 million in the 2000s, the largest decade-long increase in the postwar era.” More rental growth is expected.

It’s in part because of this rental growth that home ownership is poised to improve. The report includes an informative graph (see below) that shows how much more affordable mortgage payments have become relative to rental rates. At some point, renters are going to realize they’re losing money each month they continue to rent.

Cheaper to rent? Click to enlarge.

Another interesting point made by the report is the critical role older home owners have played in preventing the U.S. home ownership rate from falling more than it has over these last few years. The rate today stands at about 66 percent, which is about 2 percent lower than it was a few years ago. Households 65 and older are the only age cohort that has continued to increase its share of ownership; all of the others, including the important middle-aged move-up cohort, have declined.

Older households still buying. Click to enlarge.

The bottom line: It’s been a rough few years but the analysts at the Joint Center think the recovery will begin in earnest this year.

Access the 2012 State of the Nation’s Housing.

[Fun Fact: Have you ever wondered why the Harvard Joint Center for Housing Studies has the word "Joint" in it? It's because the center used to be a joint project of Harvard and MIT, but in 1989 the center was taken over entirely by Harvard, but the original name was retained.]

Robert Freedman

Robert Freedman is manager of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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Comments
  1. Confirmation of what a Realtor is currently experiencing is always welcome news.

  2. Absolutely true in El Paso with a spike in sales now!

  3. This is very interesting article. What a great news from Harvard!

  4. Thank you for the very informative post, I believe it will be a slow growth within the housing market but I have seen a little more increase recently. Reading the comment made by “home sales report”, I must agree that renting is definitely a lot cheaper than buying at this point in time. This was a great post, thanks again!

  5. Kylie

    This is precisely why the housing market will not change. The people who are conducting the studies are not in touch with the reality that the majority of americans must deal with on a daily basis. Allow me to paint a very simple picture for our Harvard geniuses. The job market is so bleak, that even with a college education it is beyond difficult for a person to find employment because there are so many people in the same situation that they must compete with. When you are a family who is lucky to even have one income, it can not support a standard family size in a society that was recently based on a two income household. When you can not afford to pay your bills, buy groceries, or put gas in your car your credit score suffers. These people do not have the option to purchase a home even though the mortgage would be less than they pay in rent! Therefore, there will not be an awakening by the ignorant renter who suddenly snaps out of it one day and realizes they are getting ripped off. However, if the true clueless wake up one day and realize what is really going on out here in the trenches then there may finally be an opportunity for economic improvement.

  6. Nicole Noseff

    We have definitely seen an increase in Lubbock market!

  7. As the Broker of Record for Milestone Silver Realty Ltd. ; I am always interested in what other Real Estate practitioners have to say and what they are doing with their blogs and websites, especially as they relate to property values and market trends. Just thought I’d let you know that I came across your site and enjoyed the time that I spent there. As we all can appreciate: Real Estate continues to be “High Paying Hard Work and Low Paying Easy Work” Thanks for posting and thanks for allowing me to comment. Keep up the fine work.

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