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The US Housing Picture: How the Nation Is Rebuilding

filed under: Real Estate posted on June 8th, 2015

Cincinnati HousingThe U.S. housing picture reflects a market that is continuing to stabilize around after a nearly decade-long slump. Freddie Mac recently released its updated Multi-Indicator Market Index, which showed that 17 of the 50 states have scores in the stable range and 25 of the 100 metro areas are stable, as well. Here is a look at the improvements that are building a better future for the American housing market.

Inflation Managed

One of the largest contributing factors to the housing markets rebuild is inflation’s current stability. Economic strength leads to a better housing market, and with inflation under control, the Federal Reserve has more room to maintain their relatively soft monetary policies a while longer. Economically speaking, the jump in interests rates last year pushed out many first-time home buyers, but a stable economy will help to regulate heavy interest rates and bring those buyers back.

Things aren’t back to pre-crash standards by any means, however. Moody’s Analytics reports that other Federal Reserve data shows that household finances in America are still relatively weak, which has lead to a reduced demand for single-family homes — about two-thirds of what they were pre-crash. Despite this, a slowly stabilizing economy points to an improvement in household finances in a few years, which will lead to an increase in home buying. The market is still limping, but at least it is walking once again.

Mortgages Available Again

Credit is getting easier to come by than it was eight years ago, and mortgage lenders are less gun-shy than they were just a few years ago. Kiplinger notes that 50 percent of lenders surveyed expected low-prime borrowers to have better access to credit this year. A greater flexibility in debt-to-income ratios coupled with falling minimum down payments on mortgages is building a less fearful lending environment for buyers and lenders alike. That isn’t to say that the mortgage industry has fully bounced back, because it hasn’t — the market is still tighter than it was in the early 2000s. Despite this, the stage is set for an improved and stable buyer environment.

Millennial Exodus

One of the most interesting factors in the resurgence of the housing market may very well come in a tidal wave of home buyers when the millennial generation start to move out of their parents’ homes. The recession forced a lot of millennials to move back in with their parents and forgo the large purchase of a home. According to the International Business Times, more than 33 percent of millennials (about 21.6 million people) were living with their parents in 2012. While young people do tend to rent instead of purchase, housing prices are stabilizing while rents are slowly climbing.

The blooming economy is a good indicator that millennials will be looking to buy in the next few years, but it probably won’t be tomorrow. They just suffered through a difficult economy, and it’s unlikely they will jump to purchase homes; but with time, the new generation of adults will be sick of living under other people’s roofs and want a place to call their own — and that’s what the market needs to finally rebuild.
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