Household Growth's Impact On Real Estate Trends

Of all the indicators that point to a potential real estate boom in the coming years, projected statistics on household creation are most compelling. Throughout the recession, people held off on real estate purchases because of falling prices, tighter credit policies, and a lousy job market.  

But there was another significant contributing factor to the real estate debacle. Young people moved back home after college rather than getting a place of their own. Roommates shared apartments to cut down on expenses. People gave up their homes to foreclosure or short-sale, and moved in with family. Now, for the first time since 1940, fewer than half of the households in this country are maintained by married couples. During the recession, people even held off on getting married or divorced, waiting for the economy to claw its way back. 

While it may be an economic necessity, a less than ideal living situation can prove stressful.  When an economy starts to improve, the first thing people do is upgrade their living situation.A healthy annual rate of household formation is right around one 1 million. During the recession these numbers fell to as low as 300,000 and today they hover around 900,000. In many ways we don't want real estate to return to where it used to be before the crash. As painful as it was, hard financial lessons were learned during the recession.  Corrections have been made, and continue in the lending industry.

Today, housing prices are up 7.4% from this point in the prior year. Two years ago these kinds of increases in value would have been hard to imagine.  But today we continue to see a shortage of inventory, and multiple offer situations in the Seattle market. A good indication that people are looking to improve their living situations. 

If you have questions about qualifying to buy a home, you can reach me at brad.toft@academymortgage.com.