Over the horizon, a housing recovery Harvard report finds immigration, other demographic trends will fuel housing demand over the next decade. Last Updated: June 23, 2008: 7:56 AM EDT NEW YORK (CNNMoney.com) -- The current housing market is bleak: home prices and sales are plummeting, foreclosure proceedings are skyrocketing and mortgage rates are on the rise. When will things be better? A new... [more]
Over the horizon, a housing recovery
Harvard report finds immigration, other demographic trends will fuel housing demand over the next decade.
Last Updated: June 23, 2008: 7:56 AM EDT
NEW YORK (CNNMoney.com) -- The current housing market is bleak: home prices and sales are plummeting, foreclosure proceedings are skyrocketing and mortgage rates are on the rise.
When will things be better?
A new study from the Joint Center for Housing Studies of Harvard University, "The State of the Nation's Housing 2008," finds the country poised to see an increase in housing demand over the next decade.
"The good news is that we still have a growing population," said Nicolas Retsinas, director of the Joint Center for Housing Studies and one of the study's authors. "As long as you have more households, more people are going to need places to live."
Social trends - people getting married later and divorced more often - are making single-person households the fastest growing household type, the study finds. In addition, a long-term net increase in potential home buyers will be driven by demographic factors: the aging of "echo boomers" into adulthood, an increased life expectancy for baby boomers and projected annual immigration of 1.2 million.
From 2010 to 2020, the number of households in the United States will grow by an average of more than 1.4 million per year, the study finds.
Unsold homes block growth
Still, before the housing market can turn around, it must first work off the record numbers of unsold homes on the market. From 2005 to 2007, the number of new and existing vacant homes for sale rose 46% to 2.12 million.
The nationwide glut of unsold homes has hit the real estate market hard, forcing down sale prices, stemming new construction and leaving millions of homeowners with properties worth less than the value of their mortgage.
In early 2008, the nation had an 11-month supply of unsold new homes and a 10.7-month supply of existing single-family homes, according to the Harvard study. A six-month supply of existing homes is considered a buyers' market. Reducing the current supply will require price declines, a decrease in interest rates, employment growth, a return of consumer confidence and the revival of accessible mortgage credit.
A reduction in new home construction is another key to decreasing inventory, Retsinas said. Privately owned housing starts fell 3.3% to a seasonally adjusted annual rate of 975,000 in May from 1 million in April, according to the Commerce Department.
A sharp drop-off in housing starts has precipitated housing turnarounds in previous bubble-bust cycles, said Karl Case, a Wellesley College economics professor and a co-founder of real estate consulting firm Fiserv CSW. Case also sees long-term growth in the housing market and agrees that immigration and other demographic trends will help fuel a long-term recovery.
"If household formation continues at pace, prices will recover and starts will rise again," Case said.
In the housing bust of the early 1990s, cities with big immigrant populations, like Los Angeles, recovered more quickly than other metropolitan areas, like Boston, with lower foreign-born, said Case.
"Not all immigrants buy houses, but many immigrants buy houses," Case said. "That has a positive effect on the prices in a market."
Regional recoveries
Retsinas said parts of the country, such as the Northeast, with fewer vacant homes could see signs of a recovery in spring 2009. He was less sanguine about markets like the Southwest, where excessive overbuilding at the height of the market means it could take two years or more to sell off excess inventory.
Recovery in the Midwest represents that biggest challenge, because the housing downturn there stems from regional economic problems beyond overbuilding.
"They're not reacting to an overheated housing market there," Retsinas said. "They live in an economy that is shedding jobs." To top of page
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Response by dco
almost 18 years ago
Posts: 1319
Member since: Mar 2008
I agree 100% that in the next 10 years people will need a place to live. I saw the interview on cnbc today and think that this analysis is laughable. Well what else do expect out of Harvard. Tell me something I don't know. WOW what a ground breaking finding, people will need to live somewhere in the next 10 years. This is the recovery scenario that has Harvard optimistic. That's great, we will see demand for housing in the next 10 years. HAHAHA... You can't make this stuff up.
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
"The current housing market is bleak: home prices and sales are plummeting, foreclosure proceedings are skyrocketing and mortgage rates are on the rise."
No it's not!
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
Haa haa haah ahhh
"parts of the country, such as the Northeast, with fewer vacant homes could see signs of a recovery in spring 2009."
But wait Steve, MMafia, and dco ALL say that RE must crash. they are as smart as Nobel Laureate's in Economics.
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
What happens if the Sky doesnt Fall in NYC?
So if NYC starts to rebound in Spring 2009 - how fast must it fall month to month over the less than 1 year until then for any decrease to have significant or lasting impact?
For Steve and the naysayers to be correct there must be a sudden and dramatic decline every month for the next 9 months. We know that most sellers do not have to sell and therefore such a sudden and dramtaic loss cannot happen.
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Response by dco
almost 18 years ago
Posts: 1319
Member since: Mar 2008
petrfitz- What is your solution for the thousands of units that New Development are sitting on. How do you account for them. Do they not need to be sold? Are you telling me the developer can afford not to sell 50,60,70%.... Of it's units. Next spring will bring much higher inventories just in a nick of time for the street warriors to notice the tiny bonus, but at least they have a job because 30% of their friends haven't gotten paid in 6 months. But after all what does this have to do with NYC real estate?
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
"In early 2008, the nation had an 11-month supply of unsold new homes and a 10.7-month supply of existing single-family homes, according to the Harvard study. A six-month supply of existing homes is considered a buyers' market. Reducing the current supply will require price declines, a decrease in interest rates, employment growth, a return of consumer confidence and the revival of accessible mortgage credit."
Well that 11-month supply didn't get to Manhattan until April of this year. We're at least a year behind.
Inventory, Inventory, Inventory.
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Response by JuiceMan
almost 18 years ago
Posts: 3578
Member since: Aug 2007
"Inventory, Inventory, Inventory"
Besides being overdramatic, why are you getting so excited about 7500 units in inventory (slowly declining over the past month)? 7500 units hardly seems like a crisis, did you know that inventory hovered around 8000 for most of 2006? What's the big deal?
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Response by ccdevi
almost 18 years ago
Posts: 861
Member since: Apr 2007
why juiceman why?
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Response by petrfitz
almost 18 years ago
Posts: 2533
Member since: Mar 2008
Juiceman - please do not confuse dco and Steve with facts and proper interpretation of those facts.
dco - also applicaitons for building permits are significantly and dramtaically off meaning less new units are being built in the near term. How do you account for that? If the existing inventory gets sold and no new units are being started - what happens?
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
First, inventory never once hit 8,000 in 2006. It averaged around 6,500.
Second, it was a banner year for Wall Street.
Third, there wasn't as much new inventory just about to come online.
Fourth, credit was easy.
Fifth, sales were low in 2006, rebounded in 2007, another record year for Wall Street. A lot of that inventory was probably in contract, closed in 2007, so it wasn't inventory in the sense of something waiting to be sold. It was something waiting to be closed. Huge difference.
But other than that, no problem.
What's happening in the rest of the country - subprime and Alt-A related - is not what's happening here. What's happening here is that the driver of the city's economy is in turmoil. We are late to the game.
There has been no material decline in inventory in Manhattan this year. It stands at about 7,800 units. One week it will go up, the next it will go down, but not materially.
It is 50% higher than in December, and now we're entering the slow summer season.
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Response by mrsblogs
almost 18 years ago
Posts: 89
Member since: Mar 2008
So, the bottom line is that single people and poor people will need housing over the next 10 years...people not married in their 20s and 30s, people who are newly divorced in their 40s and 50s, people who are living longer healthier lives in their 60s and 70s, and poor immigrants. My question is...what about wealthy families? Growing or shrinking? Because if they're shrinking, then plunking down $3 million plus on a crappy family-sized apartment may not be such a wise decision at this time! So, why are prices not plummeting in this segment? Somebody please tell me!
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Response by dco
almost 18 years ago
Posts: 1319
Member since: Mar 2008
petrfitz- I don't understand. Are telling me that ALL of the new construction projects are currently sold out and new building applications are down? If there down that's because there is no demand and inventory is a 1 year supply and that doesn't count all the units artificially with held by new developers to give the perception that inventory is lower then it actually is. If all of the New Developments were forced to disclose their true inventory figures my guess would be that total inventory would almost double overnight.
NYC has the most artificial inventory numbers in the country. They are much higher then advertised on any site.
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Response by JuiceMan
almost 18 years ago
Posts: 3578
Member since: Aug 2007
"First, inventory never once hit 8,000 in 2006. It averaged around 6,500."
I must be reading this chart wrong steve, can you please explain it to me?
Because I got the figure from the quarterly reports, which is how everyone does it. Look them up, average them, you will get my figure.
Still doesn't discuss the economic factors surrounding us.
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Response by JuiceMan
almost 18 years ago
Posts: 3578
Member since: Aug 2007
So the statement "inventory never once hit 8,000 in 2006" was incorrect. Thanks for confirming without actually saying that you were wrong. Further, you are discussing current economic pressures that are having an impact on Manhattan real estate, (which I agree with) but, my point is still valid. The inventory numbers have yet to show significant signs of distress (they are actually decreasing) so, try not to hyperventilate steve. You continue to exaggerate (as usual) where we are today and the significance of a 7500 number.
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Response by alpine292
almost 18 years ago
Posts: 2771
Member since: Jun 2008
Who cares about 2006? My goodness! Wake me up when you people enter 2007... What we should be worrying about is the remainder of 2008 and, more importantly, 2009!
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
"So the statement "inventory never once hit 8,000 in 2006" was incorrect."
Not based on the data I had at the time, and I do question those data - how is it that when you average the month-end numbers they come up with such a significant deviation from what the same firm reports as the monthly averages?
Then, the report is only from May through December:
M 7774
J 8071
J 7791
A 7784
S 8118
O 7350
N 6980
D 6236
That averages to about 7,500 in inventory. The figures I used were:
Q4 5934
Q3 7623
Q2 7640
Q1 6901
For an average of about 7,000. The 5-year average is 5,900.
Except now, when they don't seem to be volatile at all.
Ignored comment.
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
alpine, the bulls go back and say, "OH WAIT! It was like this before so maybe it'll be like this again!"
Except they ignore the economics. Go back to 2006 and you'll see housing cost 20% less than it does now, when Wall Street was earning an infinite amount more. Of course THAT doesn't matter!
I agree 100% that in the next 10 years people will need a place to live. I saw the interview on cnbc today and think that this analysis is laughable. Well what else do expect out of Harvard. Tell me something I don't know. WOW what a ground breaking finding, people will need to live somewhere in the next 10 years. This is the recovery scenario that has Harvard optimistic. That's great, we will see demand for housing in the next 10 years. HAHAHA... You can't make this stuff up.
"The current housing market is bleak: home prices and sales are plummeting, foreclosure proceedings are skyrocketing and mortgage rates are on the rise."
No it's not!
Haa haa haah ahhh
"parts of the country, such as the Northeast, with fewer vacant homes could see signs of a recovery in spring 2009."
But wait Steve, MMafia, and dco ALL say that RE must crash. they are as smart as Nobel Laureate's in Economics.
What happens if the Sky doesnt Fall in NYC?
So if NYC starts to rebound in Spring 2009 - how fast must it fall month to month over the less than 1 year until then for any decrease to have significant or lasting impact?
For Steve and the naysayers to be correct there must be a sudden and dramatic decline every month for the next 9 months. We know that most sellers do not have to sell and therefore such a sudden and dramtaic loss cannot happen.
petrfitz- What is your solution for the thousands of units that New Development are sitting on. How do you account for them. Do they not need to be sold? Are you telling me the developer can afford not to sell 50,60,70%.... Of it's units. Next spring will bring much higher inventories just in a nick of time for the street warriors to notice the tiny bonus, but at least they have a job because 30% of their friends haven't gotten paid in 6 months. But after all what does this have to do with NYC real estate?
"In early 2008, the nation had an 11-month supply of unsold new homes and a 10.7-month supply of existing single-family homes, according to the Harvard study. A six-month supply of existing homes is considered a buyers' market. Reducing the current supply will require price declines, a decrease in interest rates, employment growth, a return of consumer confidence and the revival of accessible mortgage credit."
Well that 11-month supply didn't get to Manhattan until April of this year. We're at least a year behind.
Inventory, Inventory, Inventory.
"Inventory, Inventory, Inventory"
Besides being overdramatic, why are you getting so excited about 7500 units in inventory (slowly declining over the past month)? 7500 units hardly seems like a crisis, did you know that inventory hovered around 8000 for most of 2006? What's the big deal?
why juiceman why?
Juiceman - please do not confuse dco and Steve with facts and proper interpretation of those facts.
dco - also applicaitons for building permits are significantly and dramtaically off meaning less new units are being built in the near term. How do you account for that? If the existing inventory gets sold and no new units are being started - what happens?
First, inventory never once hit 8,000 in 2006. It averaged around 6,500.
Second, it was a banner year for Wall Street.
Third, there wasn't as much new inventory just about to come online.
Fourth, credit was easy.
Fifth, sales were low in 2006, rebounded in 2007, another record year for Wall Street. A lot of that inventory was probably in contract, closed in 2007, so it wasn't inventory in the sense of something waiting to be sold. It was something waiting to be closed. Huge difference.
But other than that, no problem.
What's happening in the rest of the country - subprime and Alt-A related - is not what's happening here. What's happening here is that the driver of the city's economy is in turmoil. We are late to the game.
There has been no material decline in inventory in Manhattan this year. It stands at about 7,800 units. One week it will go up, the next it will go down, but not materially.
It is 50% higher than in December, and now we're entering the slow summer season.
So, the bottom line is that single people and poor people will need housing over the next 10 years...people not married in their 20s and 30s, people who are newly divorced in their 40s and 50s, people who are living longer healthier lives in their 60s and 70s, and poor immigrants. My question is...what about wealthy families? Growing or shrinking? Because if they're shrinking, then plunking down $3 million plus on a crappy family-sized apartment may not be such a wise decision at this time! So, why are prices not plummeting in this segment? Somebody please tell me!
petrfitz- I don't understand. Are telling me that ALL of the new construction projects are currently sold out and new building applications are down? If there down that's because there is no demand and inventory is a 1 year supply and that doesn't count all the units artificially with held by new developers to give the perception that inventory is lower then it actually is. If all of the New Developments were forced to disclose their true inventory figures my guess would be that total inventory would almost double overnight.
NYC has the most artificial inventory numbers in the country. They are much higher then advertised on any site.
"First, inventory never once hit 8,000 in 2006. It averaged around 6,500."
I must be reading this chart wrong steve, can you please explain it to me?
http://www.millersamuel.com/charts/gallery-view.php?ViewNode=1182046606idkky&Record=5
Because I got the figure from the quarterly reports, which is how everyone does it. Look them up, average them, you will get my figure.
Still doesn't discuss the economic factors surrounding us.
So the statement "inventory never once hit 8,000 in 2006" was incorrect. Thanks for confirming without actually saying that you were wrong. Further, you are discussing current economic pressures that are having an impact on Manhattan real estate, (which I agree with) but, my point is still valid. The inventory numbers have yet to show significant signs of distress (they are actually decreasing) so, try not to hyperventilate steve. You continue to exaggerate (as usual) where we are today and the significance of a 7500 number.
Who cares about 2006? My goodness! Wake me up when you people enter 2007... What we should be worrying about is the remainder of 2008 and, more importantly, 2009!
"So the statement "inventory never once hit 8,000 in 2006" was incorrect."
Not based on the data I had at the time, and I do question those data - how is it that when you average the month-end numbers they come up with such a significant deviation from what the same firm reports as the monthly averages?
Then, the report is only from May through December:
M 7774
J 8071
J 7791
A 7784
S 8118
O 7350
N 6980
D 6236
That averages to about 7,500 in inventory. The figures I used were:
Q4 5934
Q3 7623
Q2 7640
Q1 6901
For an average of about 7,000. The 5-year average is 5,900.
But you missed this:
http://www.millersamuel.com/charts/gallery-view.php?ViewNode=1208573039sjWVf&Record=3
Apartment Listings More Volatile than Prices.
Except now, when they don't seem to be volatile at all.
alpine, the bulls go back and say, "OH WAIT! It was like this before so maybe it'll be like this again!"
Except they ignore the economics. Go back to 2006 and you'll see housing cost 20% less than it does now, when Wall Street was earning an infinite amount more. Of course THAT doesn't matter!