What to Expect in Housing Affordability

What to Expect in Housing Affordability | Windermere Blog | Windermere Real Estate

Posted in Economics 101 Videos and Market News by Matthew Gardner, Chief Economist, Windermere Real Estate

What keeps Windermere’s Chief Economist, Matthew Gardner, up at night? Housing affordability. As the U.S. Population moves towards both coasts and the Southwest, putting upward pressure on land prices and the value of homes, we will see a greater cost of living, which could directly impact the work force and economies in those areas. Gardner weighs in on how West Coast cities can improve housing affordability through policy and infrastructure changes.

 

Western Washington Gardner Report Q1 2016

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ECONOMIC OVERVIEW

Washington State has seen very robust growth over the past 12 months with the addition of 102,600 new jobs, which is 224,000 more jobs than seen at the previous peak in 2008. With this robust growth, it is unsurprising to see the unemployment rate trend down to 5.8%—well below the long-term average of 6.4%. As pleasing as it is to see the unemployment rate drop, it is equally pleasing to see that the decrease comes in concert with growth in the civilian labor force, which continues to grow at a very solid pace. I continue to believe that there is no risk that we will see a statewide decline in the employment picture in 2016.

HOME SALES ACTIVITY

  • There were 13,841 home sales during the first quarter of 2016, up by 3.8% from the same period in 2015. Sales activity continues to slow as a function of inventory constraints. Any spring “bounce” in listings has, thus far, failed to materialize.
  • The growth in sales was most pronounced in Grays Harbor County, which increased by 35% (but represented a real increase of just 63 units). Robust increases were also seen in Kittitas, Mason, Pierce, Snohomish and Island Counties. Sales declines were seen in San Juan, Jefferson, Cowlitz and King Counties.
  • Overall listing activity was down by 30.1% compared to the first quarter of 2015, and this continues to put upward pressure on home prices (discussed below).
  • Economic vitality in the region, combined with interest rates that continue to retest historic lows, is driving buyer demand that simply cannot be met. I hope that we will see more inventory come online as we move through the year, but believe that any reasonable growth in inventory will still be insufficient for the demand in the market.

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HOME PRICES

  • Given the demand factors mentioned above, I am not surprised that prices are up by an average of 10.1% year-over-year. This is up from the 9.3% average growth in prices that was reported in the fourth quarter 2015 report.
  • When compared to the first quarter of 2015, price growth was most pronounced in Jefferson County, and all but three counties saw prices increase by double digits from the previous year.
  • Interestingly, there were eight counties that actually saw a drop in average sale prices between the last quarter of 2015 and the first quarter of 2016. I believe this was caused by seasonal factors, but will keep an eye on it.
  • Very straightforward supply and demand factors are pushing prices higher. While this certainly favors sellers, I believe that there are some buyers who are starting to suffer from “buyers’ fatigue”. Rampant growth in inventory would sort this out but it is unlikely to occur this year.

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DAYS ON MARKET

  • The average number of days it took to sell a home dropped by sixteen days when compared to the first quarter of 2015.
  • As was seen in the Q4 2015 report, there were just two markets where the length of time it took to sell a home did rise, but again the increases were minimal. Skagit County saw an increase of three days while San Juan County rose by nine days.
  • It took an average of 86 days to sell a home in the first quarter of this year—up from the 78 days it took to sell a home in the last quarter but this is simply due to seasonality.
  • Sales activity remains most brisk in the Central Puget Sound counties. Given their proximity to the major job centers, this is not a surprise.

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CONCLUSIONS

This speedometer reflects the state of the region’s housing market using housing inventory, price gains, sales velocities, interest rates, and larger economics factors. For the first quarter of 2016, I have moved the needle slightly more in favor of sellers. content_16088_WWA_GardnerReportQ1_SpeedometerInventory constraints persist and this is now starting to affect sales activity, with growth in pending as well as closed sales starting to trend down. However, price growth remains well above average and interest rates are still close to historic lows.

ABOUT MATTHEW

Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has over 25 years of professional experience both in the U.S. and U.K.

 

This blog was originally posted on the Windermere.com.

What’s the Deal with Condos?

A question that I am being asked regularly these days is, “Why isn’t anyone building condominiums anymore?

Given the egregious lack of homes for sale – and considering that single family home builders have not done their part to satisfy substantial pent-up demand – one would expect to see developers raising condominium towers at a frenetic pace, but that is simply not happening.

Firstly, a bit of background on this: the Seattle real estate market saw a rapid rise in the development of condominiums starting in the late 1990’s and continuing through to the housing bubble burst of 2008. When the post-recession dust finally settled, what condominiums were left were either converted into apartments or returned to the lenders, who subsequently disposed of them via auction or at very favorable prices.

As the housing market recovered, shell-shocked developers remained wary of condominiums. However, even if there were any developers who had an appetite to build more towers, they were essentially blocked by banks who still perceived condo developments as an extremely risky land use.

Given this situation, it wasn’t surprising to see developers rapidly turn their attention to the apartment market. They were aware that demand had taken off and that banks were willing to lend on that product type. Paralleling the substantial demand from the rental market, the institutional investment community had started to snap up a large number of projects, but their appetite was not being satisfied.

So, with this veritable alignment of planets, many traditional condominium developers turned their attention to the development of rental projects. There was financing available, substantial demand, limited risk, and the potential for an earlier payout (if the developer sold to an institution).

This then became the path that many developers chose.

But these are not the only reasons why many developers stopped building condominiums; there were, and still are, additional hurdles that continue to hold them back.

Firstly, costs across the board continue to increase. Land values in downtown Seattle re-broke the $1,000 per-square-foot mark – a number not seen since well before the recession started. Additionally, almost all of the area’s contractors are busy building apartments (or Amazon.com office space), which has put additional upward pressure on labor costs. On top of this, material costs continue to escalate due to high demand from other development types.

Because of these factors, the prices for new condominiums have to be at a substantial premium, and developers were/are uncertain if the market can support these high price points.

There is also one last hurdle that is stopping developers in their tracks – the remarkably onerous construction defect laws that exist in our state. Current laws allow homeowners’ associations to file large group lawsuits for construction problems associated with new condominiums. Because of this factor alone, a vast majority of developers are not building condominiums for fear of exposure to litigation.

Several states, including Washington, are looking to make changes to the current construction defect laws, but until that happens, the insurance premiums that developers must pay, combined with the almost certainty that they will be sued regardless of the quality of their construction, is further stifling the development community.

Our region continues to grow its population base but not its land base. As such, density needs to be embraced. Condominiums play an important part of the equation, but until this segment of the market regains its footing, there will be further pressure on housing of all types to accommodate our region’s growth, and this will continue to put upward pressure on prices.

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Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has over 25 years of professional experience both in the U.S. and U.K. 

 

 

Premier Look Book January 2016

This month’s Premier networking breakfast saw more than 150 Puget Sound-area agents come together to hear the latest information on the real estate market. Brokers from as far away as Bellingham joined local brokers at Broadmoor Golf Club to present their newest luxury listings and to discuss 2016 luxury real estate trends and forecasts.

This month, we heard from Windermere’s Chief Economist, Matthew Gardner, and Windermere Owner, Matt Deasy. The Washington State economy has added almost 370,o00 jobs since the lowest point of the recession at the start of 2010. We expect to continue seeing modest job growth this coming year. That being said, our economy will continue to expand, which will be a benefit to our region’s housing market. A few other forecasts for this upcoming year: Mortgage rates will rise at a modest pace. We will see continued home price growth (+/- 5.5%). The Millennials will start to enter the market. Supply in the high-end market will remain tight, but easing demand may take some of the edge off. Matt Deasy provided a recap of 2015 year-end stats, which showed that Windermere continues to lead in the most homes sold and bought in luxury real estate in the Pacific Northwest.

Check out January’s Look Book and read more about the event by clicking here or on the picture below.

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The Gardner Report: Fourth Quarter 2015

ECONOMIC OVERVIEW

The Washington State economy has added almost 370,000 jobs since the lowest point of the recession at the start of 2010. Additionally, total employment is 176,000 jobs higher than seen at the 2008 peak. With a vast majority of our metropolitan areas having fully recovered from the job losses seen during the recession, I expect to see somewhat more modest job growth in the coming year. That being said, our economy will continue to expand, which will be a benefit to our region’s housing market.

HOME SALES ACTIVITY

  • There were 16,895 home sales during the fourth quarter of 2015, up by 4.6% from the same period in 2014. Sales activity is starting to slow somewhat but this is due to inventory constraints.
  • The growth in sales was most pronounced in Cowlitz and Lewis Counties and double-digit growth was also seen in Thurston County. Sales declines were seen in Grays Harbor County and Skagit County, but only minimally.
  • The number of home sales grew in all but two counties, with the average number of sales up by almost 6% from the same period in 2014.
  • I am not surprised to see some decline in sales start to appear. Listing activity was down by 28% compared to the fourth quarter of 2014, and there were no counties where there were more homes for sale in Q4-2015 versus Q4-2014.

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HOME PRICES

  • Prices in the region rose by an average of 9.3% on a year-over-year basis but were
  • 0.4% lower than seen in the third quarter of 2015.
  • Unsurprisingly, no counties saw a drop in average home prices compared to fourth quarter last year.
  • When compared to the fourth quarter of 2014, San Juan County again saw the fastest price growth with an increase of 37.6%. However, this county is notorious for extreme swings given the huge variations in prices in the San Juan Islands. Double-digit percentage gains were also seen in five other counties.
  • As long as inventory constraints persist, it is likely that price growth will continue.
  • That said, modest increases in interest rates, in combination with declining affordability conditions in several markets, will likely slow price appreciation.

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DAYS ON MARKET

  • The average number of days it took to sell a home dropped by nine days when compared to the third quarter of 2014.
  • It took an average of 78 days to sell a home in the fourth quarter of this year—down from the 91 days it took to sell a home in fourth quarter of last year.
  • There were just two markets where the length of time it took to sell a home did rise, but the increases were minimal. Jefferson County saw an increase of eight days while Mason County rose by two days.
  • King County remains the only market where it takes less than a month to sell a home.

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CONCLUSIONS
content_15322_WWA_GardnerReportQ4_SpeedometerThis speedometer reflects the state of the region’s housing market using housing inventory, price gains, sales velocities, interest rates, and larger economics factors. For the fourth quarter of 2015, I have left the needle at the same position as the previous quarter. In as much as the market is still very heavily in favor of sellers, I fear that some markets are reaching price points that will test affordability. Furthermore, while inventory levels are likely to see some growth in 2016, it will not be enough to satisfy demand, adding further upward pressure to prices.

Overall, 2015 was a stellar year with sales volumes and home prices moving higher across the board. In 2016, I believe we’ll see some growth in sales activity, as well as continued price growth – just at more modest levels than last year. Interest rates are going to rise moderately through the year, but still remain very competitive when compared to historic averages. In other words, any increase in interest rates should not be a major obstacle for home buyers.

Looking forward, I believe 2016 will be a year of few surprises. Because it is an election year, I do not expect to see any significant governmental moves that would have a major impact on the U.S. economy or the housing market.


content_MatthewGardner_colorMatthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has over 25 years of professional experience both in the U.S. and U.K. 

This blog was originally posted on the Windermere Blog.

2016 Economic & Housing Forecast

The National Economic Forecast

1.The U.S. will continue to expand with real GDP growth of 2.3% in 2016.

Although a positive number, the forecasted rate of growth suggests that we will be modestly underperforming in 2016.  On a positive note, oil prices are likely to remain well below long-term averages, which puts more money into consumers’ pockets in terms of disposable incomes.  However, I believe that consumers are likely to continue to save rather than spend which will constrain growth.  That said, there is certainly no recession on the horizon – at least not yet – and a strong dollar will act as a bit of an anchor.

2.Employment will continue to expand but the rate of growth will slow. Look for an increase of 1.6% in 2016.

We are rapidly approaching full employment (generally considered to be when the unemployment rate drops below 5 percent).  As such, growth in employment has to be driven more by population growth rather than a return to employment. 2015 saw an average of around 210,000 jobs created per month and I believe that this is likely to slow to an average monthly gain of 190,000 new jobs.

3.The U.S. unemployment rate will continue to drop and end 2016 at 4.8%.

As mentioned above, we are heading toward full employment and, as such, the national unemployment rate cannot trend much lower.  That said, the less acknowledged U-6 rate (which includes those working part-time and those marginally attached to the workforce) will remain elevated at around 8%, signifying that there is still some slack in the economy and room for the rate to drop a little further.

4.Inflation will remain in check with the Consumer Price Index at 1.9%.

The Federal Reserve has begun the long-awaited tightening of monetary policy and we will likely see the Fed Funds Rate continue to move higher over the next two years. Inflation has yet to respond to the low unemployment rate, but it will.

The core rate of inflation should remain in check and the overall rate could stay below long-term averages as a function of stubbornly low energy costs. Should we see a shift in OPEC’s position relative to oil supply, the overall rate of inflation could rise more rapidly.  Oil prices, therefore, will remain in focus during 2016.

The National Housing Market Forecast

5.Mortgage rates will rise, but we will still end 2016 with the average 30-year fixed rate below 5%.

I am taking the Fed at its word when it says that monetary tightening in 2016 will be gradual and heavily data dependent. Accordingly, I expect only a modest uptick in long-term rates in 2016. Furthermore, as long as the Federal Reserve continues to reinvest the dividends that it is receiving from their bond holdings – which is highly likely – the yield on the key 10-year treasury will remain low and hold mortgage rates in check. This is only likely to change after the general election, therefore suggesting that rates will remain very attractive relative to their long-term averages.

6.Credit Quality – which had been remarkably stringent – will relax a little.

Access to credit, specifically mortgage instruments, has not been easy for many would-be homebuyers but that is set to change.  I believe that we will see some improvement, specifically for borrowers with “near-prime” credit. This will be of some assistance to first-time buyers; however, credit quality will still be higher than it needs to be.

7.Existing home sales will rise modestly to an annual rate of 5.53 million units with existing home prices up by 4.7%.

I anticipate that we will see some improvement in overall transactional velocities in 2016, but unfortunately, demand will still exceed supply. Prices will continue to rise, but at a more constrained pace than seen over the past few years. This will be a function of modestly rising interest rates as well as slightly improving levels of inventory. I anticipate that we will see more listings come online as more households return to positions of positive equity in their homes.

8.New home sales will jump and be one of the biggest stories for 2016.  Look for a 23% increase in sales and prices rising by 3.4%.

I believe that builders will start to build to the entry-level buyer, filling a huge void.  Additionally, I see the total number of new home starts increase quite dramatically in 2016 as banks start to ease lending and builders start to believe that the downward trend in homeownership has come to an end.  This will help to absorb some of the pent-up demand currently in the market.

9.Foreclosures will continue to trend down to “pre-bubble” averages.

Any story regarding foreclosures will be a non-story as the rate will continue to trend down toward historic averages. However, we will see the occasional uptick as banks work their way through their existing inventory of foreclosed homes. Move along.  There’s nothing to see here.

10.The Millennials will start to enter the market.

There are several substantial reasons to expect an increase in Millennial buyers. Firstly, early Millennials are getting older and starting to settle down, and even with modestly higher mortgage rates, rents are likely to continue to trend upward, and this will pull many into homeownership.

Secondly, more favorable mortgage insurance premiums, additional supply from downsizing boomers, and growing confidence in the housing market will lead to palpable growth in demand from this important – and substantial – demographic.

To conclude, it appears to me that 2016 will be a year of few surprises – at least until the general election! Because it is an election year, I do not expect to see any significant governmental moves that would have major impacts on the U.S. economy or the housing market.

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Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has over 25 years of professional experience both in the U.S. and U.K. 

 

 

 

The Gardner Report: Third Quarter 2015

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Economic Overview

After a period of above-average growth, Washington State has seen a modest slowing in employment growth, but we continue to add jobs at a respectable rate. The State unemployment rate was measured at 5.3%, marginally above the national level, but it is trending in the right direction.

Although growth continues to be uneven across the state, there are some encouraging signs which suggest that all of our main metropolitan areas should see positive job growth for the foreseeable future.

Home Sales Activity

• There were 22,207 home sales during the third quarter of 2015, up by 14.1% from the same period in 2014.
• For the first time in several years, there were no counties that saw annual decreases in home sales.
• The growth in sales was most pronounced in Kittitas County, and all but two counties saw double-digit percentage increases from the same period last year.
• The lack of available inventory in the region continues to be a concern. Listings in the third quarter were down by 18% from the second quarter, and down by 24.5% from the third quarter of 2014.

Home Prices

• Prices in the region rose by an average of 6.3% on a year-over-year basis and were 9.6% higher than seen in the second quarter of 2015.
• The only county where home prices fell on an annualized basis was in Kittitas County, but the drop was a minuscule 0.5%. Kittitas County saw sale prices grow by 5.8% between the second and third quarters of this year.
• When compared to the third quarter of 2014, San Juan County showed the fastest price growth with an increase of 14.6%. Double-digit percentage gains were also seen in four other counties.
• As long as inventory constraints persist, it is likely that price growth will continue. However, if interest rates rise in 2016, as they’re expected to do, we will likely see price growth slow.

Days on Market

• The average number of days it took to sell a home dropped by nine days when compared to the third quarter of 2014.
• It took an average of 74 days to sell a home in the third quarter of this year—down from 84 in the second quarter.
• There were just two markets where the length of time it took to sell a home did rise, but the increases were minimal. Jefferson County saw an increase of eight days while Mason County rose by two days.
• King County remains the only market where it takes less than a month to sell a home.

Conclusions

This speedometer reflects the state of the region’s housing market using housing inventory, price gains, sales velocities, interest rates, and larger economics factors. For the third quarter of 2015 I have moved the needle a little farther in favor of sellers. Although sales did slow between the second and third quarters, I attribute this to a lack of inventory rather than any other factors. Additionally, interest rates dropped between the second and third quarters, which made buying more favorable.

The persistently low levels of inventory in the region remain a concern. Such an imbalance between supply and demand is unsustainable. When I look at the ratio between listings and pending sales there are some counties with less than two months of inventory, which is troublesome. Any number below four months is certainly considered to be a seller’s market and, in my experience, a prolonged period of time with less than six months of inventory results in an unstable market.

In normal housing market cycles, when such an imbalance exists we could expect home builders to fill in the gap with inventory, but this has not happened thus far. Unless we see a rapid escalation in construction activity, the market will remain remarkably tight well into 2016.

About Matthew Gardner

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Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has over 25 years of professional experience both in the U.S. and U.K.

You’re welcome to download and view the full PDF report for more information. This blog was originally posted on the Windermere Blog.

Will millennials be ‘perma-renters’?

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This article originally appeared on Inman.com 

Several factors have kept this generation renting, but they won’t last forever

Takeaways:

  • Many believe that millennials will continue to be renters and not homeowners for various reasons.
  • The first of the millennials were not even in a position to consider buying until roughly 2008.
  • Credit has become tighter for older buyers; therefore, the recent rise in first-time buyers actually can be attributed to millennials.

There has been a lot of buzz in the news recently suggesting that millennials will forever be renters and not homeowners.

Reasons for this theory are plentiful and include amenities that apartments offer, flexibility when it comes to moving and changing jobs, and inability to afford a home given the crushing student debt load that many are carrying.

So will this be the renter generation? Let’s take a look at the data.

Millennial homeownership rates

Those who believe in the “perma-renter” theory point to U.S. Census Bureau statistics that state the homeownership rate for individuals under the age of 35 has dropped from a peak of 43.6 percent in 2004 to 34.6 percent today.

Now, I can’t deny that this is a precipitous drop, but let’s not get carried away quite yet. To start with, the first of the millennials (born in 1982) were not even in a position to consider buying until roughly 2008. That accounts for four years of college followed by two years of work.

We all know that 2008 was a terrible year to buy a home, so let’s bring it forward a little further to 2012. At that time, the ownership rate was roughly 36.7 percent. Since then, it has dropped to the current level of 34.6 percent. This drop is hardly a drastic one, but it is a drop all the same — so what happened?

Fewer urban options

As mentioned earlier, some suggest that millennials are bypassing homeownership because they prefer to remain mobile and are drawn to the bells and whistles that modern apartment living offers.

I would add to this that urban life simply appeals more to younger people than living in the suburbs; especially to those who are just starting their careers and don’t yet have a family.

But the options to buy in many cities are few and far between. Since the Great Recession, there has been a shortage of new, for-sale multifamily development, which limits the availability of urban housing for buyers.

At the same time, new apartment projects are being built at a frenetic pace. According to REIS, 240,000 apartment units are scheduled to open their doors by the end of this year, which represents a 43 percent increase compared with 2014, and well over 100,000 units above the 10-year trailing annual average.

The makeup of first-time buyers

Now let’s turn to the National Association of Realtors’ data on the percentage of existing sales to first-time homebuyers. As the chart below shows, between 2008 and mid-2010, there was a rapid runup as a result of the first-time homebuyer tax credit.

After that program expired, the percentage naturally dropped and trended lower through the end of 2013. However, it’s clear that the share of sales to first-time buyers has been trending higher for the past 17 months. But not all of these buyers are millennials, so we need to dig a little deeper for answers.

Source: National Association of Realtors

To better understand the makeup of first-time buyers, I started by looking at their age distribution. There is some great data from the Federal Reserve Bank of Atlanta that sheds light on this through analysis of mortgage data and demographic attributes.

As is shown in the table below, first-time buyers are actually not getting older. Although their numbers tumble after the crash of the housing market, the age distribution did not change drastically.

Now, if we believe that the decline was driven by the millennials, surely we would have seen first-time buyers getting older, but interestingly enough, they didn’t.

Source: Federal Reserve Bank of New York

To add to this, analysis prepared by the Center for Real Estate Analytics suggests that the gap between median credit scores of younger buyers and older buyers has closed.

In other words, credit has become tighter for older buyers; therefore, the recent rise in first-time buyers actually can be attributed to millennials.

So, if credit quality isn’t the issue holding back millennials, and rents continue to increase at a frenetic pace, it stands to reason that we will see more and more members of this generation becoming homeowners.

I hope I’ve demonstrated that these broad statements that people are making about millennials being perma-renters are unfounded.

Are many of them delaying their purchasing decisions? It appears so, but I expect them to move into homeownership in greater numbers as they start to marry, have families or simply find themselves paying too much in rent.

So where are these millennials going to buy? I’ll tackle that topic in an upcoming post.

content_MatthewGardner_colorMatthew Gardner is the chief economist for Windermere Real Estate. He is the former principal of Gardner Economics and has over 25 years of professional experience both in the U.S. and U.K. Follow him on Twitter @windermere.

 

Median Single-Family Home Price Hits 500k

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According to the NWMLS (Northwest Multiple Listing Service), the median sales price of single-family homes in King County in June climbed to $500,000, up 10.3 percent from a year ago. The last peak? July 2007, at the start of the nation’s housing bubble, when it hit $481,000. No need to fret though, our sources say the market is completely different this time around (and our sources are usually right). Windermere’s Chief Economist, Matthew Gardner, says, “I do not see the risk of a national housing bubble anywhere in the foreseeable future.” Learn the reasons why in his latest blog post.

Homeownership Has Declined, But It Won’t Be Forever

In addition to talking about housing bubbles, another topic that is becoming popular among housing scaremongers is the ongoing decline in the U.S. homeownership rate. Remarks range from the direct, “American homeownership is at its lowest level in more than two decades,” to the downright inflammatory, “Rental surge to drop homeownership rate to 61.3% by 2030”. When I read statements like this it always drives me to dig into the data to see what is really going on.

The data that everyone uses to track homeownership is provided by the U.S. Census Bureau, which publishes quarterly stats on ownership rates dating back to 1965. As you can see in the chart below, the rate remained remarkably stable between 1965, when it registered at 62.9%, and 1994, when it was 63.8%. For the purposes of this discussion, I have highlighted three presidential terms: two under President Clinton and President George W. Bush’s first term.

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The “boom times” for housing essentially started after the election of President Clinton, who went to remarkable lengths to encourage homeownership. Readers may remember the 1994 National Homeownership Strategy when the President directed HUD to come up with a viable plan to increase homeownership. And it worked; during the Clinton administration, homeownership rose from 64.2% to 67.1%.

During his first term, President Bush continued the practice of encouraging homeownership, as it dovetailed with his Ownership Society goals. His, and President Clinton’s efforts, led to the highest home ownership rates on record, peaking at just over 69% (about 5% higher than record-keeping averages). But as we all know now, it also led to the burst of the biggest housing bubble in our nation’s history. Yes, ownership rates skyrocketed, but the market was artificially inflated and unsustainable. Home ownership rates have since dropped to 63.7%, but this is only marginally below the long-term average of 64.3. Hardly calamitous as some are suggesting.

That said, I do think that that the rate could fall a little further. Now, before you start blaming the Millennial generation, stop, because they are not the ones leading this charge. (As a side note, I do feel rather sorry for this group, as they appear to be taking the brunt of any and all economic woes at the moment.) If we look at homeownership rates by age, between 1994 and today, the decline in homeowners under the age of 35 is 2.5%. A palpable drop, but slight when compared to 35-44 year olds who have seen their numbers drop by 6% – from 64.4% to 58.4%. Why? Because this group took the largest hit following the housing crash, and many lost their homes to foreclosure.

Circling back to Millennials, it’s true that this group is more subdued relative to homeownership – and there’s good reason for it. Millennials comprise a smaller share of married couples and a higher share of in-city dwellers versus suburbs. But their lack of growth may well be offset by middle-aged families who are thinking about getting back into homeownership again. According to RealtyTrak, while Millennials have gotten a lot of attention lately as the generation whose below-normal homeownership rates are changing the landscape of the U.S. real estate market, the boomerang buyers — who are primarily Generation Xers or Baby Boomers — represent a massive wave of potential pent-up demand that could shape the housing market in the short term even more dramatically.

Data from Transunion supports this theory, suggesting that there are about 700,000 consumers who will become eligible to re-enter the housing market in 2015, and up to an additional 2.2 million potential buyers will requalify over the next five years. It’s likely that these so called “boomerang buyers” will become homeowners again, which will do its part to offset the Millennial drop, and raise the homeownership rate back up to its historic averages.

So, have homeownership rates declined? Yes, but as the data and this analysis show, taking a simple “peak-to-trough” view of homeownership figures does not necessarily provide accurate results. Regardless of how many scaremongers declare otherwise.

Matthew Gardner, Chief Economist, Windermere Real Estate