Despite uncertainties, housing has found its footing
Despite all odds against the housing recovery, the market is steadily improving and housing experts do not expect the sector to lose its momentum any time soon.
Regardless of an inadequately housing supply, rising home prices reacting to strong demand and difficult lending environment, market expectations remain bullish on housing.
Nonetheless, housing is in its early stages of recovery and panelists at the Bipartisan Policy Center’s conference believe it’s not time for the Federal Reserve to take their foot off the bond-buying gas pedal just yet.
“There is a cyclical and structural nature to the problem,” explained Paul Weech of Housing Partnership Network.
He added, “We haven’t solved for the underlying structural problem and if we revert back to the norm, we still have millions of homes trying to get back in the full market recovery.”
One of the major factors still impacting the housing market is underwriting standards.
Fannie Mae senior vice president and chief economist Doug Duncan pointed out that there is a high correlation between the business cycle and the credit cycle, which will ultimately lead to an established fixed floor of the credit box.
“If in the regulatory process we can establish a fixed floor then we’ll change fundamentally the level of housing,” Duncan explained.
Looking to the future state of housing, experts agreed that immigration will play a significant role in the housing recovery.
Data taken from 2012 and estimated through 2050 shows that the economy will have 15 million less workers if the immigration rate continues, meaning less people in the housing market and less people paying into their entitlements, Duncan noted.
Another group of Americans that will affect the future of housing is the baby boomer generation, which is the fastest growing age group.
Many have a desire to remain in a home, but want to be mobile. As a result, homebuilders are trying to find new ways to accommodate these needs as well as attract first-time homebuyers to market.
Conine Residential Group president Kent Conine explained that homebuilders are introducing new innovations and productions into the marketplace.
For instance, Conine is in the process of developing a system in which seniors sell their current homes and downgrade to plain vanilla property, which will allow them to travel, while still maintaining a home.
On the reverse side, many homebuilders are going back into the inner cities to tear renovate properties in the hopes of enticing first-time homebuyers into the market.
“While it’s far from where it needs to be, housing is improving,” stated Realogy Holdings Corp. chairman and chief executive officer Richard Smith.
He concluded, “If given a little nudge from regulators and Congress to put in some definitive rules, housing has only one way to go, up.”