Friday, July 31, 2015

National Housing Outlook and Trends

As a follow up to the most recent post, below includes the outlook/trends in the national housing market based on the Harvard's "The State of the Nation's Housing 2015" report.  

The housing market is constantly changing due to many different dynamics such as the size of new homes are getting bigger.  More duplexes and multifamily units are being built to supplement the high demand for rentals.  Furthermore, Single family homes more often are being purchased as investment (rental) properties. Also, the major changes in demographics will also influence new housing construction as two of the biggest generations (baby boomers and millennials) age and search for more suitable housing for their lifestyle. 

  • Multifamily (2+ units) starts rose steadily to nearly 360,000 units in 2014—more than in any year in the 1990s and 2000s.
  • More than 90 percent of multifamily units started last year were intended for the rental market, up from less than 60 percent in the mid-2000s.
  • Rental growth is likely to remain strong as members of the huge millennial population enter the housing market. According to the latest JCHS projections, individuals that are currently under age 30 will form over 20 million new households between 2015 and 2025, and most of these households will be renters.
  • There will also be a large increase in renters over age 65 as more members of the large baby boom generation cross this threshold over the coming decade.
  • Single-family construction starts increased 5 percent in 2014.
  • Just over one million housing units were started last year, which until the recent downturn would have been the lowest annual total in the past half-century.
  • Multifamily construction starts increased 16 percent in 2014.
  • More multifamily units were started in 2014 than in any year since 1989.
  • Up to 1 million households who lost their homes to foreclosure have already restored their credit standing, making them again eligible for FHA and other mortgages, and 1.5 million more could do so shortly.
  • While the volume of new homes built is near record lows, the median sales price of new homes hit a record high $283,000 last year.
  • The median sales price of new single family homes is now 35 percent above the median sales price of existing single-family homes.
  • Rather than signaling a broadly healthy market, however, this record-setting price is largely due to changes in the size, quality, type, and location of new homes.
  • The size (median square footage) of the typical new home increased 12.5 percent in 2009–13.
  • Although the three major Census Bureau surveys all show that household growth since 2008 has remained far below the 1.2–1.4 million annual average of the previous decade, the Housing Vacancy Survey—the timeliest of the sources— reported a marked pickup in the fourth quarter of 2014 that brought household growth for the year to 800,000, closer to its long-run potential.
  • The Joint Center for Housing Studies projects that demographics will support baseline household growth of just under 1.2 million annually in 2015–25, with the millennial generation driving much of this growth.
  • By 2035, given headship rates similar to those of previous generations, the millennials (born 1985-2004) are expected to form more than 30 million new households.
  • Over the next two decades, the number of adults aged 70 and over will increase by 91 percent, driving the demand for housing that is affordable, accessible, and provides social connection and supportive services.
  • At more than 86 million, the number of people that comprise the millennial generation has already exceeded that of the baby boomers at similar ages and will increase over the next 20 years as immigration (typically of young adults) continues to pick up.
  • In 2015–25, the typical millennial will move from the 20–24 year-old age group (where just one in every four persons has formed an independent household) to the 30–34 year-old age group (where half of the population lives independently).
  • As the labor market makes steady gains, rising employment rates among young adults will impact household growth, as employed younger adults in their late 20s and early 30s are 50 percent more likely than unemployed younger adults to head independent households.
  • Although net international immigration is still below the 1.2 million annual average in 2000–07, the pace of immigration is projected to pick up in the decades ahead, projected to reach nearly 1.4 million by 2035.
  • Minorities are expected to drive 76 percent of net household growth over the next 10 years and fully 85 percent over the next 20.
  • Homeowners continued to pare down their mortgage debt in 2014; real aggregate mortgage debt totaled about $9.4 trillion last year, a 2 percent decline from 2013 and a 13 percent drop from 2010.
  • Despite a decline in mortgage debt at the aggregate level, a higher share of older owners are entering their retirement years with mortgage debt: more than a third (38 percent) of owners aged 65 and over had mortgages in 2013, up from a little over a quarter in 2001.
  • According to Fannie Mae’s National Housing Survey for the fourth quarter of 2014, 82 percent of respondents thought that owning made more financial sense than renting. Even among renters, 67 percent agreed with this statement.

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