The housing market is still struggling to gain a good pace. That’s a nice way of saying the market is still doing poorly. And as another sign of the bad conditions, mortgage rates have reached historic lows.
15-year fixed-rate mortgages averaged 3.13% last week, a new record low. And the average rate on a 30-year fixed-rate mortgage fell to 3.88%, less than 1% from the record low.
The low rates are a reaction to the decreased demand of homes. Depressed prices, high rents, and low mortgages are all incentives for borrowers to purchase homes.
The record rates make housing more affordable than ever. Yet home prices continue to stay low. So why aren’t more people buying?
There are many waves changing the tide of real estate. Among them are the Obama administration’s plan to convert foreclosed homes into rental units and the boom in the rent market from tech jobs. But the biggest factor shaping the rent market of the future might be demographics.
As the Baby Boomers retire, there’s a new group ready to take their place. They are called Generation Y, Millenials, or Echo Boomers.
Defined as those born between 1977-1989, they make up 70 million strong. That’s larger than the Baby Boomers, and three times the size of Generation X.
Generation Y is checking into the workforce. By 2025, Gen Yers will make up roughly 75% of the world’s workforce, according to a BPW Foundation’s study published last year.
Those 70 million individuals wield a spending power that exceeds $200 billion.
Fighting the uphill battle of reviving a weak housing market, the Federal Government is planning on stepping into the market with a creative solution – to turn foreclosed homes into rental units.
The plan would create roughly 200,000 new rental homes this year.
Though still in the works, the US government has indicated it plans to carry out the operation in “early 2012″. That’s a relatively specific guideline, all things considered.
Despite encouraging signs, the housing market is still not recuperating at a healthy pace. Home prices remain low, yet the buyers just aren’t there. But where one market drags, another one flourishes.
Rental properties are providing huge returns for those able to make the investment.
The price of rent has been increasing rapidly in cities all over the country. But the cities where demand has increased significantly are those with strong job markets. Cities on the coasts like Washington D.C., Boston, Los Angeles, and Seattle are seeing rent demand push prices up as they add more jobs.
So, you’ve rented, and maybe you’ve already owned a home, but, you’re back on the renting side. Somewhere, deep down, you’re questioning the economics of this decision and trying to determine if you should make the plunge to become a homeowner. After all, isn’t that the American dream?
Not according to the census data, which has been continuing a trend towards renting since around 2004, and FannieMae’s recent research. Nearly all data points to the growing rental market and the declining home ownership market, which if you are a property manager is really nothing new. What I think IS new and not often seen here are some underlying factors that will keep this trend in a continual movement for quite some time, which is also represented in the FannieMae statistics.
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