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Source link: http://archive.mises.org/20612/friday-links-young-people-turn-to-rental-housing/

Friday Links: Young people turn to rental housing

January 20, 2012 by

Housing starts remain at 15-year lows, bumping along near the same levels they reached in early 2009 following the financial crisis. MSNBC reported that the latest starts data capped off “a grim year” although the starts totals were actually up slightly from December 2010. Nevertheless, starts are still more than 75 percent off peak levels.

The housing starts data isn’t all gloomy. If we drill down and look at the multifamily starts, we see that those are up 50 percent since December 2010.

Why are they up so much? The markets are responding to rapidly falling vacancies in apartments. According to one recent report, apartment vacancies are heading down to tight levels while rents are heading up. Also:

Hessam Nadji, managing director, research and advisory services at the firm, tells GlobeSt.com that “Demand for rental housing will remain robust in 2012 as strong demographic trends combine with shifting consumer behavior. The total population within the prime 20-34 year old renter cohort has increased dramatically, and will increase by an additional 2 million through 2015,” he says. “As this age cohort continues to face significant hurdles to homeownership and as the tight employment market encourages flexible housing decisions, many of these new households will continue to favor renting.”

It’s not just that potential homeowners are facing hurdles, it’s that they just don’t buy the myth of homeownership anymore. And with demand for rentals up, housing starts for new single-family homes is going nowhere.

Meanwhile, as USAToday reports, mortgage rates continue to fall to record lows, but few people are buying.

The average rate on the 30-year fixed mortgage fell again this week to a record low. The eighth record low in a year is attracting few takers because most who can afford to buy or refinance have already done so.

In happier times, even a small decline in the mortgage rate would produce a frenzy of buying and refinancing. Now, the feds are pushing rates down below 4 percent just to get a tiny bump in activity.

Incidentally, last week, CoreLogic’s report on home prices showed yet another year over year decline in prices, following 16 months of year-over-year declines, in spite of those record-low mortgage rates.

So one would think that the last thing real-estate-industry workers need is to have their web sites shut down. But, that may be just the latest threat to the industry from government meddling if we get SOPA and PIPA: Some real estate pros take aim at anti-piracy legislation


Walt D. January 20, 2012 at 6:34 pm

The dirty little secret about California is that just about no 1st time buyer ever came up with a 20% down payment. People looked for 10%, 5% or even nothing down deals, borrowed from parents, from employers, paid straw men to cosign. The banks knew about this and looked the other way. They did not care – most people would wait 2 years and then be able to refi with 20% equity at a better rate.
With house prices in to $300,000 range, now that banks are being a lot more diligent about verifying loan applications, where is the 1st time borrower going to come up with $60,000 in cash to make the down payment?

אחסון אתרים January 22, 2012 at 10:41 am

yes.. most people would wait 2 years and then be able to refi with 20% equity at a better rate

Jared January 22, 2012 at 7:43 pm

where is the 1st time borrower going to come up with $60,000 in cash to make the down payment?
I know this is counter to the prevailing culture but they might try saving up for the down payment. I know it is a radical idea but it worked for me. I didnt go for a $300000 house because I dont make that kind of money but the principle is the same.

Mirela January 22, 2012 at 7:50 pm

A first time buyer is looking for a good rate as well as something that they can affor. When they face a down payment of $60,000 in cash that already discourages them. Some people spent half of their life saving that much so to have someone between 20-30 years have that much saved is crazy. Having rates be at an all time low does not mean people will go crazy and start buying some people just wont give up that much money for a down payment.

Walt D. January 22, 2012 at 10:46 pm

Another reason young people might not want to buy a house, even if they could afford to, is job security, Not having a house to unload makes it easier to change jobs or find a new job if necessary.

nate-m January 23, 2012 at 9:43 am

In many cases mobility is a important thing if you want to be employed. House ownership precludes that.

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