Is It Too Soon for Housing Economy Optimism?
This past year, the Greater Boston area finally saw an increase in the number of single-family homes sold. Condo sales have improved as well. Even the country as a whole is seeing some improvements. As of November 2012, housing starts have gone up a little over 20% since last year, and between October and November 2012, the number of housing permits issued rose 3.6%.
It's looking like 2013 will bring economic growth to the housing market, but will it be enough?
Because of the recent economic conditions, many baby-boomers have opted to leave their traditional single-family homes in the suburbs and move into apartments and condos. More young adults than ever are living with their parents, and many retired parents have moved in with their children.
However, as unemployment rates continue to fall and the housing market brightens, it's likely that these young adults and retirees will be able to move out. Here's the catch: young adults don't want to move into the rising number of available suburban townhouses. The current 15 to 24 year old demographic is expected to prefer homes near the workplace, with stores and resources within walking and biking distance. Despite that buying a home is more affordable than usual with the recent low interest rates, fewer young people are opting for them.
Because of the baby-boomers moving into smaller places, the quantity of available traditional single-family homes is increasing. The demand for these homes continues to decrease as the new generation of young adults chooses to rent apartments and condos instead. The demand for apartments and condos is increasing rapidly, causing the average rental prices to inflate. Between 2015 and 2020, there will be an estimated 2.3 million new renters to the housing market, and in the past five years, less homes and apartments were constructed than are needed to support the nation's demographics. The demand for apartments is so high in fact, that in 2012, the average rents rose 4%. The National Association of Realtors, NAR, expects that by 2015, average rental prices will raise another 4%.
There's another twist, and it's this nasty "fiscal cliff." Some experts are saying that if we lunge off this cliff, housing recovery doesn't stand a chance, and since it's an integral aspect of economic success, it's bad news all around.
The deadline--December 31st--is rapidly approaching. Your move, Congress.