When will the real estate market turn?

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  • I don’t have a crystal ball, but we have some positives.  The first is that the market downturn has brought home affordability levels to the best in many, many years – at least to levels not seen since 1973 and maybe ever.  The unsustainable increases we had in 1995-2005 have leveled off.  Sellers have become much more reasonable in setting prices and as consumers begin to gain more confidence that prices have leveled off they will return to the market.  Inventory drops are the biggest indicator of a turning market.  And I’m encouraged that inventory has dipped to a 7.2 month supply, down 11.1% from a year ago, the lowest level since March 2006.   Total inventory is 3.29 million homes. 

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  • No one has a crystal ball to predict the future, but it is fair to look at the demographics driving the real estate market.  Real estate is positioned well for the future.

                                                              i.      Baby boomers are in their prime real estate buying years and are 78 million strong.

                                                            ii.      The Pew Research Center reports minority homeownership levels still have room for improvement.  The gaps between white and minority households remain significant with homeownership rates for Asians (59.1 percent), African-Americans (47.5 percent) and Latinos (48.9 percent) well below the 74.9 percent among whites.

                                                          iii.      Immigrants are moving to the U.S. by the tune of 1.1-1.5 million a year depending on the source.  These are legal immigrants who add value to our country and society.  They need housing.

                                                          iv.      Echo boomers will likely have similar economic impact in coming years that their baby boomers parents have had through their lives.  Echo boomers are born between 1977 and 1994 and are 73 million strong and according to the Joint Center for Housing Studies at Harvard University, 4 million turn 21 each year. 

                                                            v.      Household formation is also an important statistic.  The Joint Center for Housing Studies at Harvard University projects at least 1.25 million households will be created annually from 2010-2020 and will be led by the echo boomers.

                                                          vi.      People move for lifestyle.  There have been 4 million marriages and a record more than 8 million babies born in the last two years indicating there is demand for housing.  Many of these growing families have not bought a home and are either renting or living with family as they save for a down payment.  We know there is pent up demand.  Look at coldwellbanker.com numbers where we have had 30 million visitors each of the last two years.