REALTORS® Conference Residential Economic Issues & Trends Forum

The Residential Economic Issues & Trends Forum is a two-hour update and overview of important economic issues held recently at the National Association of REALTORS® (NAR) 2014 Conference and Expo.

The first half of the session was led by Mel Watt, Director of the Federal Housing Finance Agency (FHFA). In his presentation, he discussed some of the factors behind the low demand for home ownership that many markets are experiencing.

  • Millennials (people aged 35 years and less) are waiting longer than their parents to get married and have children, which delays household formation and home buying.
  • Millennials are experiencing economic hardship from entering the job market during the recent recession.
  • Whether by choice or need, more Millennials are living at home with their parents.
  • For those just leaving college, student loan debt is at an all-time high. Although higher education can lead to higher income, many with high debt are having difficulty in saving money required for down payments.
  • Americans in their 40s and 50s may be former homeowners who have lost jobs or have reduced incomes which forced them to lose their homes. Many are back on their feet with regular incomes, but may now have damaged credit ratings.

Last, but not least, Mr. Watt discussed the residual psychological damage from the housing crisis, with many people having lost confidence in homeownership.

NAR Chief Economist Lawrence Yun, PhD presented during the second half of the session. Dr. Yun began by presenting results from a recent study of brokers’ expectation of profitability for 2015. Over 60% of residential brokers noted positive expectations, while over 70% of commercial brokers expected profits to be higher next year.

Yun noted that while consumer confidence has been steadily increasing in the latter part of 2014, confidence of REALTOR® members peaked in March 2014 and has been declining ever since. He speculated that an uneven recovery could explain the discrepancy in confidence between consumers and REALTORS®.

He continued with a market overview, stating that new home building is low, though building of multifamily residences is back to normal. He noted that home price growth continues, but it varies greatly according to market. Lastly, Dr. Yun predicted that nationally, home sales would be 3% lower in 2014 than in 2013. Note: This reporter would suggest that the 3% nationwide decline in sales for 2014 could explain why REALTOR® confidence is down… just saying.

Dr. Yun went on to share some statistics regarding the value of home ownership, noting that the average net worth of renter’s households is $5,500 versus $195,500 for homeowners’ average net worth. He stated that while many homeowners are recovering personal wealth since 2010, overall home ownership in the U.S. has declined by one million households.

Regarding the national economy, Dr. Yun presented the following facts:

  • The U.S. economy has experienced nine years of growth below 3%. Though sub par by recent standards, our economy doing better than Europe’s.
  • Eight million jobs were lost during the recent recession, but ten million jobs have been gained back.
  • Unemployment is lower and new claims are down.
  • Employment of eligible adults is at 59% and the “Quit Rate” (people voluntarily changing jobs) has been increasing since 2010.
  • Inflation is low.
  • Household net worth is at an all-time high, but much of that accumulated wealth is in the hands of wealthy persons. The stock market has experienced a five year “bull market” which has been setting record highs, but 95% of the U.S. has no access to the market and has not benefited.
  • The U.S. is the second youngest in average citizen age of the developed nations, yet like much of Europe, our birthrate is falling, which can cause economic stagnation. Legal immigration is one avenue for filling in the gap, but it too is falling.
  • Canada leads in the number of foreign real estate transactions, but China leads in volume.

Ending on a positive note, Dr. Yun predicted that 2015 would see an increase in residential home sales of 7%.

Tags: , , , , , ,