Monday, March 28, 2011

Real Estate Outlook: Younger Generation Leads Way

If the latest release from the National Association of Home Builders and Builder Magazine is any indication, it may just be the younger generation of Americans that leads the way to a housing recovery.

While they make up just 32 percent of the home-buying population, Generation X is the most mobile of the generations.

Mollie Carmichael, principal of John Burns Real Estate Consulting in Irvine, California, says, "They are in full force with their careers and they need to accommodate growing families."

In comparison, Baby Boomers, who make up 41 percent of potential buyers, are waiting it out until the market improves.

Is this part of the reason that existing-home sales fell in February for the third consecutive month? Some experts think so.

According to National Association of Realtors chief economist, Lawrence Yun, “Housing affordability conditions have been at record levels and the economy has been improving, but home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers.”

Regionally, the numbers were consistent. All four regions saw decreases in existing-home sales in February. And the declines were fairly hefty figures.

The Northeast was down 7.2 percent, with the median home price down 9.5 percent from a year ago. It is now around $230,000.

The Midwest saw the largest decline, at 12.2 percent. Their median price is a much more affordable $122,000, but is still down 5.4 percent from February 2010.

And the South and West fell 10.2 and 8.0 percent, taking them to existing-home sale figures close to year ago levels.

Unfortunately, it's not just sellers feeling the crunch of the down market. Builders are feeling the pain, as well.

Nationwide housing starts and permits were both down in February, according to the U.S. Commerce Department.

Bob Nielsen, NAHB chairman, says this decline is the effect of builder uncertainty. He says, "The decline in new construction and permits in February is the culmination of a great deal of nervousness that both builders and consumers are feeling right now. In an already-fragile market where credit for building and buying homes remains extremely tight, additional concerns about energy costs, interest rates and other factors are contributing to an atmosphere in which many have adopted a very cautious stance."

And just like with existing-home sales, no region was immune.

Regional declines were nearly all in the double digits. The Northeast was down 37.5 percent. The West posted a 28 percent decline for February. And the Midwest was down a whopping 48.6 percent. The smallest decline was seen in the South, at just 6.3 percent.

Overall, the economy continues to try to recover. There are pockets of lights in areas all across the nation. Let's hope they start shining on some of the darker areas.

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