SAN ANTONIO, Texas – June 20, 2011 – The downturn in the economy has changed the way people live and think about real estate, forcing many to become renters and sending adult children back home to live.
Three economists at the National Association of Real Estate Editors conference last Friday said those trends could affect the residential real estate market for years to come.
And that double dip you’ve been hearing about in the housing market? Never happened. The market’s still on it’s way down, they agreed.
The sluggish job market, falling home prices and persistent foreclosures have driven up demand in the rental market, especially in hard-hit areas such as Tampa Bay, said Stan Humphries, an economist with Zillow.com.
Foreclosed homeowners are often forced into the rental market. More adult children are moving back home with their parents and more elderly are moving in with their kids, Humphries said.
There’s also an uptick of multiple families moving in together to help make ends meet, he said. This increase in rental demand will translate to higher rental rates this year, said Humphries who predicts rental rates will increase 3.5 to 4.5 percent in 2011, compared to the previous year.
At the same time, Humphries said 1.2- to 2.2-million people will transition from owners to renters over the next couple of years.
Humphries’ other panelists, Jed Smith, an economist with the National Association of Realtors and Mark Dotzour, an economist with Texas A & M Real Estate Center, agreed.
Housing prices are now falling, after a brief period of what looked like stabilization late last year, but all three economists said the nation isn’t experiencing a double dip.
“We never hit bottom in the first place,” Dotzour said.
Dotzour and Smith, with the Realtors, said government intervention, such as tax credit incentives for buyers and failed mortgage modifications, actually made things worse in the long run.
“We like capitalism on the way up and socialism on the way down,” Dotzour said. “And we’re paying for it now.”
Humphries said the government spent $15 billion to $20 billion on tax credits, and “we’re paying all that back.”
The bright side of this continued downturn is that multi-family developers will benefit, the economists said.
Multi-family housing starts are up, and developers are preparing for additional increase in demand, Humphries said.
As foreclosures increase and are resold to people who want to live there, rather than to investors, prices will stabilize. When that happens, he said, single-family demand will increase, too.
But it’s unclear how long it will take for that to happen, Dotzour said.
“Why would a bank wait 24 months to start the foreclosure process?” he said.
Banks are still taking too long to foreclose, he said, adding that the market won’t be stable until all the foreclosure inventory is reabsorbed into the market.
When things have improved, though, Humphries said, the housing landscape in most metros will look different. That’s particularly true, he said, in areas like Tampa Bay, where builders constructed thousands of new homes on the outskirts of the city.
“People want to live closer to cities and in smaller homes,” Humphries said. “A lot of the housing stock in the suburbs don’t speak to that demand.”
That may mean more redevelopment near downtown cores.
Copyright © 2011, Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
