Housing to boom in next decade if home-loan rates are stable Despite recent
fears that housing prices have become artificially inflated and are
headed for a crash à la the stock market, experts predict that
as population, household growth and homeownership continue to grow,
so will the demand for homes. Ever-resilient housing, which defied
trends in other industries to emerge as the nation’s economic
backbone during the recent recession, appears headed for continued
success in the coming decade. It is likely that
the housing market will continue to boom, possibly pushing the rate
of homeownership to a lofty 72 percent nationwide by 2013, especially
if mortgage interest rates stay at single-digit levels, according
to a new report, America’s Housing Forecast: the Next Decade
for Housing and Mortgage Finance, published by the Homeownership Alliance,
an industry group. “Household
growth along with replacement requirements, second home demand and
changes in vacancies will require average production of 1.85 million
to 2.17 million new housing units per year,” said David Seiders,
chief economist for the National Association of Home Builders. Conventionally
built single-family homes will account for about 70 percent of the
housing supply produced in the next 10 years, the report said. Multifamily units
will account for a 20 percent share of the market; the remaining 10
percent will be mobile and manufactured homes. A driving force
behind the ongoing health of the housing industry will be strong growth
in household formations, which are expected to range somewhere between
1.32 million and 1.63 million per year, Seiders said. “The data
tell us that housing is not going away as long as you have a strong
economy and single-digit interest rates,” said David Lereah,
chief economist for the National Association of Realtors. The nation’s
rate of homeownership, which already stands at more than 69 percent,
will top 70 percent by the end of the next decade, perhaps rising
as high as 72 percent, Lereah predicted. What’s behind
this trend? One reason for
the increase is that minority households are starting to catch up
with their non-Hispanic white counterparts. At least 10 million additional
households will achieve homeownership by 2013, according to the report,
and roughly half of them will be minorities. David Berson,
chief economist for Fannie Mae, said that home prices probably wouldn’t
advance at the 8 percent clip of recent years, but would follow trends
in income growth. He expects home price appreciation to average 4
percent to 6 percent between 2004 and 2013. Mortgage rates,
of course, are a wildcard. Over the next decade, “At some points,
mortgage rates will be lower and at other times higher than expected,”
Berson said. In late October,
Freddie Mac reported that benchmark 30-year fixed rate mortgages averaged
5.74 percent, down slightly from 5.82 percent a week earlier. A year
ago, 30-year fixed loans averaged 5.95 percent. While seesawing
interest rates could have some impact on household decisions to rent
or to own, Berson said they were unlikely to undermine the basic demand
for housing resulting from the nation’s strong population growth. “America’s
families will likely need 125 million mortgage loans for home purchase
or refinance, totaling $27 trillion in home loan originations over
the next 10 years,” said Frank Nothaft, chief economist for Freddie
Mac. “First-time
buyers will remain a major component of the purchase market,”
he added, buying about 24 million homes. Chicago’s
housing market saw a robust year in 2004, with 2,848 units sold during
the first half of the year, compared to 1,774 during the same period
the year before, according to housing analysts Appraisal Research
Counselors. “The American
dream of homeownership remains alive and well,” said Paul Merski,
chief economist for the Independent Community Bankers of America.
“For current homeowners and individuals and families seeking
to buy a home, the economic benefits of homeownership will continue
to rise in the years ahead.” For more information
on the report, visit: www.homeownershipalliance.com. |