Analysts for the National Association of Realtors (NAR) say fundamentals are shifting in favor of a national housing market recovery.
In the Milwaukee metropolitan area, home sales have increased year-over-year for 16 consecutive months, according to the Greater Milwaukee Association of Realtors (GMAR).
“Existing home sales, new home sales and housing starts are all recording notable gains this year,” Lawrence Yun, chief economist for the National Association of Realtors said at the 2012 Realtors Conference and Expo. “And all of the major home price measures are showing sustained increases.”
As the economy recovers, increased household formation could be boosting the housing market. A recent NAR study says that dual-income households today comprise a greater portion of the housing market. According to the study, 65 percent of homebuyers this year are married couples, up from 58 percent two years ago.
“Household formation has been put on hold for four years. That is now coming to an end. That will certainly create demand for housing units – rental or owner-occupied,” said Mark Eppli, interim dean of the College of Business and the chair in real estate at Marquette University. “Given the pain endured by homeowners over the past five years, some may come back to owner-occupied units more slowly, but the occupancy costs of ownership to those of rental are stunningly favorable, which I believe will bridge the negative perceptions toward ownership.”
As the housing market continues to recover, prices should finally start to rise as inflation pressures take hold, Yun said. Rents are already beginning to rise and the U.S. government’s fiscal and monetary policy should also drive inflation, he said. That will make home ownership more attractive.
“Real estate will be a hedge again inflation, with values rising 15 percent cumulatively over the next three years, also meaning there will be fewer upside-down home owners,” Yun said.
National median existing home prices should rise 6 percent this year and 5 percent in 2013 and in 2014.
The Milwaukee area housing market has yet to experience significant price appreciation since the Great Recession. Prices in the four county metro area dipped 1.9 percent in the third quarter, according to the GMAR.
But prices are expected to rise nationally, Yun said. The rising tide could finally drive prices up in the Milwaukee area.
“People who purchased homes at low prices in the past couple of years, including many investors, can expect healthy growth in home equity over the next four years, while renters who were unable to get into the market will be in a weaker position because they are unable to accumulate wealth,” Yun said. “Not only will renters miss out on the price gains, but they’ll also face rents rising at faster rates.”
Nationally, new home sales are expected to increase to 368,000 this year from a record low of 301,000 in 2011, and grow to 575,000 in 2013, Yun said. Housing starts for this year are expected to be 776,000, up from 612,000 in 2011 and will rise to 1.13 million next year, he said.
Despite the rise in new construction, it might not be enough to keep up with demand as the market recovers after years of little new construction, Yun said.
“Unless building activity returns to normal levels in the next couple of years, housing shortages could cause home prices to accelerate, and the movement of home prices will be closely tied to the level of housing starts,” he said.
