Nationwide, the 1st quarter of this year saw housing activity depressed. Clearly the difficult weather conditions throughout the country played a role, but other economic indicators provide additional explanations for this dip in the market. According to Lawrence Yun, the National Association of Realtors’ chief economist, the primary roadblock is the seen in the jobs-to-population ratio, which was weaker than it was from the late 1990’s through 2007. Consequently the Gross Domestic Product slowed during the first quarter this year, despite any indicators suggesting fresh signs of a recession. Still impeding the recovery of the real estate markets are continued tight credit conditions and inventory restraints, which have led to rising home prices and higher mortgage rates.
The resulting impact is that home sales activities have retrenched during the past six months, and although expected to gradually increase, it is projected to show a decline in comparison to a year ago. For those who are fortunate to sell their homes during this period of recovery, the good news is that some of their equity will be recovered.
The real estate market clearly reflects the overall economy’s fragile recovery. The economic trends that impact young adults need to improve to fuel the expected housing recovery. There are over 3 million more young adults that lived with their parents in 2012 than in 2007, their overall incomes have decline and many are saddled with college debts, which impacts their ability to qualify for a mortgage. As the economy improves and young adults enter the housing market, as 9 out of 10 are expected to do in the future, the housing market should rebound significantly. Until then, expect home prices to rise, longer periods for homes to sell (DOM), and more difficult settlements due to banking requirements.
