American Real Estate Forecast From A Supply
Posted by admin | Real Estate | Posted on February 24th, 2009
On any given day, people can easily find articles and news stories describing an impending bankruptcy of the so-called housing bubble. Despite this gloomy prediction, many experts believe that the recent slowdown in housing will be a modest and gradual adjustment, rather than strong bust or reject. These experts believe that the factors leading to a sharp decline in the housing market are not reflected in the current economic outlook. In fact, a recent study by the Joint Center for Housing Studies of Harvard University noted that “despite the cold running down the long-term outlook for housing is bright.”
The rise and fall of the real estate market is subject to the forces of supply and demand, and these factors point to a positive and stable growth in the segment of real estate.
Supply factors
Limited supply of property is generally scarce and pushed housing prices up. Conversely, an oversupply of real estate tends to put downward pressure on housing prices. Despite the current slowdown in the housing market, factors that favor the limited impact of supply growth in the housing market. Some of these factors include:
1. The builders have adjusted growth plans in regions that have an oversupply of new housing. Over time, excess inventory is likely to be exhausted and the balance between supply and demand.
2. Land availability in certain regions, and the regulations of land use and associated compliance costs will continue to restrict the supply of new homes.
DEMAND FACTORS:
Homes located in regions with high demand tend to be more expensive than homes in areas with low demand. Factors that affect demand for housing suggest favorable long-term prospects for housing. Some of these factors include:
1. No evidence of significant differences in the loss of jobs on board, estimates of unemployment rates relatively low.
2. Long-term increase in demand for second homes, holiday homes and senior housing in the “baby boomers”.
3. Long-term increase in demand for entry-level homes for the children of baby boomers.
4. Long-term increase in demand for entry-level homes of immigrants.
5. Long-term increase in demand for entry-level homes by the second generation of Americans.
6. Expected that the entries and exits of the United States population across regions and not significantly impact the overall United States real estate housing market.
7. Relative stability in interest rates.
8. Continued stability in the long-term rates of home appreciation.
9. In general, increased rates of wealth across all age groups.
ABSTRACT
In summary, strong household growth, overall rising incomes and wealth, and a stable economy all bode well for continued long-term growth in the real estate market. While the overall housing outlook is favorable, affordability will continue to be a challenge, as wages, especially in the lower income levels, have not kept up with housing costs.