The real estate bubble and the subsequent burst in the past eight years has meant fundamental changes to the industry, but home ownership rates show some of those changes were taking place much earlier.
This week CoreLogic, a national provider of financial and property information, released a report on the latest housing and mortgage trends. The latest report was interesting in that a big part of it focused on the changes in homeownership rates: While overall home ownership was up in 2010 compared to 1980 (65.1 percent compared to 64.4) it's steadily dropping in the 25-34 and 35-44 age groups, which tend to be the prime home-buying years.
In the 25-34 age group, homeownership dropped from 51.6 percent in 1980 to 42 percent in 2010.
For the 35-44 group, homeownership dropped from 71.2 percent to 62.3 percent during the same period.
While some of this trend can be discounted because the U.S. is getting older demographically, the authors of the report offered some other possibilities. This includes real median income remaining stagnant in those prime home-buying age groups while home prices have gone up; delays in labor force participation by the younger group, which includes staying in school longer; the trend of delaying marriage; and changing migration patterns.
With income stagnant and home and rental prices rising, the report found families are allocating a bigger percentage of income toward housing. In 2010, homeowners spent 33.2 percent on housing, up from 31.9 percent in 2005. Renters spent 38.4 percent on housing, up from 35.6 percent in the same period. Naturally if families are spending more on housing, they have less to save or spend on non-housing items.
As the industry continues to get itself back on track, these trends should be kept in mind. If a smaller percentage are buying homes in the prime-buying stages in their lives, and a higher percentage of older people already own homes, it seems to indicate less buying/selling activity is in store for the overall market once it is past the real estate bubble aftermath.
It is also becoming clear that families spending more money on housing will mean other aspects of the economy will suffer. Either incomes need to rise or home prices/rental rates will need to decline.
THIRD QUARTER NUMBERS
Earlier this month reports came out about third quarter housing activity in Whatcom County. To sum up, home sales were up, prices down compared to the third quarter of 2010. Here are a few other interesting factoids, supplied by Coldwell Banker Bain:
Overall home sales: While the third quarter was stronger in terms of home sales, overall 2011 is tracking about 4.2 percent behind 2010. Last year was the slowest year in terms of sales since 1987 in Whatcom County.
Median price: While Whatcom County's median home sale prices were down in the third quarter, median prices are actually up slightly in 2011 compared to 2010 because of some higher-price sales earlier in the year. In 2010 and most of 2011, the median price has settled in that $250,000 range. The peak was in 2007, when the median price was $290,725, according to the Whatcom County Real Estate Research Report.
Inventory: With little new construction and sellers recognizing the market conditions, inventory remains low compared to the real estate bubble years of 2006-08. On average, 1,491 properties have been available at any one time in 2011, down from 1,563 in 2010. In 2007, inventory approached the 2,500 level. Pre-bubble, inventory was much lower: in 2004 and the first half of 2005, inventory was in the 500-900 range.
Months of inventory: With less inventory, the months of supply is 8.8 so far in 2011, down from 12.2 in 2010. A rule of thumb among real estate agents is six months' inventory is considered a balanced market between buyers and sellers.
