Housing formation and population growth are the twin engines of a housing recovery.A new report issued by the Joint Center for Housing Studies (JCHS) of Harvard University sees the nation getting ready for increased housing demand over the next decade. Obviously, Hawai‘i has always had its own niche in the real estate market.
According to JCHS Director Nicolas Retsinas, factors supporting this trend are population growth, the increase in single-person households, rising life expectancy of Baby Boomers, aging of the “echo boomers” as homebuyers, and immigration.
The study states that between 2010 and 2020, the U.S. will grow in population by more than an average of 1.4 million annually.
An important part of the expected housing recovery is a reduction in unsold homes on the market. According to the JCHS study, in early 2008 the U.S. had an 11-month supply of unsold new homes and a 10.7-month supply of existing homes. Experts point out that previous housing recovery cycles have first been preceded by a reduction in new housing starts.
A six-month supply of existing homes is considered a buyers’ market, and a reduction in the current supply is expected to occur as homes are priced realistically to sell, interest rates hold steady or are reduced, employment recovers, consumer confidence expands, new home starts are reduced and sufficient lending capital is available to mortgage borrowers.
The long-range key is housing formation (people starting families, people getting divorced, single-people moving into their own home, etc.). Housing formation and population growth are the twin engines of a housing recovery.
The study’s author points to different paces of recovery in different areas of the country. Parts of the country with fewer vacant homes could see recovery begin by the spring of 2009. The Southwest, however, may take up to two years to shed its excess inventory and begin to move forward.
The Midwest, which is facing an economic slowdown and a housing slowdown, may be the last to fully recover. If the experience of previous recoveries holds true, cities like Los Angeles, with larger immigrant populations, are expected to recover sooner. Immigrant home purchases in previous recovery periods have generally had a positive role in supporting regional home prices.
Premiere Mortgage has offices on Maui and Kaua‘i and provides a wide range of services to the real estate community. Tricia Morris may be reached on Maui, in Kihei, at 874-8800, Wailea, at 891-8900, West Maui at 665-8800, on Kaua‘i at (808) 822-2300, or toll-free at (800) 813-7711.