US Housing Market Analysis: Housing Starts Declining in Recent Months

It appears that the long national nightmare is over in the housing market, as prices seemed to have bottomed out in most places and are outright climbing in many markets. This housing market analysis will explore the many factors contributing to this resurrection, including record-low interest rates, pent-up demand, a cycling through of foreclosed homes, and a slowly improving economy.

Low Interest Rates

The question at the center of just about every housing market analysis these days is trying to understand just how low interest rates can go. It’s been months since rates initially broke their all-time low at the sub-4% mark (according to Fannie Mae and Freddie Mac numbers), and they have been dropping every since. While this has clearly been one of the main percolators of the market, it seems like they really can’t go any lower—can they? However, if they don’t these rates should continue to energize sales.

Pent-up Demand

Articles have abounded over the last few years of policy makers and real estate professionals fretting over the lack of interest in purchasing homes among the under-35 crowd, with many a housing market analysis pointing to it as a chief factor in the on-going slump. If there is nobody to buy the last generation’s starter homes, then that previous generation can’t start moving on to the next level of home. However, it seems that the rock bottom prices could no longer be resisted by the Millenials, and there has clearly been a snowballing of demand as these young people are starting to really eat up the inventory.

Shrinking Inventory

Another critical piece of any housing market analysis is the state of inventory, as the housing bubble burst nearly five years ago, and a great deal of foreclosed homes have already made their way back on the market and into the hands of new owners, leaving a smaller supply to meet increasing demand. Rumors of banks sitting on a great deal of properties in an effort to drive up costs notwithstanding, the simple fact of the matter is that most of the dirt-cheap, foreclosed, and short sale properties have simply exited the market.

Improving Economy

However, this younger generation couldn’t buy homes if they didn’t have jobs, and it seems that a slowly improving economy has translated into the kind of upward mobility that better jobs can bring. This group is actually able to purchase houses even if they aren’t making as much as the generations before them, as the low interest rates and glut of low cost foreclosed homes has pushed the average monthly mortgage payment below what they would be paying in rent. In the long run, these folks might actually see some benefit from the recession, as they will continue to enjoy ultra-low living expenses even as their earning power goes up.

The final conclusion of this housing market analysis is that the only hesitation to embracing a very rapidly recovering housing market is that fact that housing was the wellspring of Great Recession and that the pain in that industry was so widespread and personally felt. The bottom line is that the market has many factors on it’s side, and we can expect many years of robust sales as demand tries to catch up with the unnatural malaise of the last few years.

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