• The West Coast is generally stronger than the East Coast, and urban areas are generally stronger than suburban. Within those generalities, there are exceptions.
  • Overvaluation and oil prices are things to watch.
  • Millennials are delaying their homebuying activity, but they are such a large group that this tailwind could be significant.

When Leigh Gallagher, assistant managing editor at Fortune magazine, asked two economists at Global Connect to recap the housing market, she got very different answers — perhaps unsurprisingly.

Allan Weiss

Allan Weiss

Allan Weiss, founder of Weiss Analytics, compared the housing economy to “90 million individual molecules, like the wind, and it’s a whirlwind.

“It used to all be blowing in one direction, but there are many different strands and it’s impossible to generalize. It’s moving in multiple directions,” he said.

Hui Shan, vice president at Goldman Sachs, had a more straightforward explanation: “We are in the second phase of recovery,” she said. After the first phase (2012-2013), the fundamentals, like job growth, are what will drive the housing market.

Are there regional strengths and weaknesses?

To generalize, said Weiss, the East Coast is not doing as well as the West Coast, urban areas are more robust than suburban areas, and rentals and condos are doing better than single-family.

Prices were higher to begin with on the East Coast, he explained. “New York is probably the most stable, but the lowest place with respect to how we measure the health of the market, which is the percent of houses rising,” Weiss said. Only 51 percent of houses in New York have rising prices; the other 49 percent are flat or falling. But the good news, Weiss said, is that the decline has stopped.

Hui Shan

Hui Shan

Regionally, Shan named two things to watch cautiously. “One is overvaluation,” she said. “We think a lot of the metro areas in California look expensive.”

The second risk is oil prices. “Oil prices are supposed to stay low,” Shan explained. “If that’s the case, we haven’t seen much of a decline in house prices in Houston or Midland, Texas.”

What macro indicators show the truth?

The most direct macro driver of the housing economy is mortgage rates, said Weiss — and they continue to fall. “If they go up, you’ll immediately see it impact the market, and I think that would be very damaging,” he said.

Supply and demand, said Shan. “Population growth, kids moving in with parents or forming their own households — that’s the demand side,” she said. “Supply side is inventory — is it coming up?”

And then the millennials

Weiss said that millennials will get pushed out of their parents’ homes when their parents decide to move back to the city — “which they’re doing,” he said. And although urban centers are more expensive, “wealthier boomers are doing it and millennials are figuring out a way to do it.”

Shan noted that housing demand is lower for millennials than previous generations, but it’s a huge cohort. There are more young adults than in previous generations living with their parents — that number is not going down, but not going up, Shan said. Not all millennials are buying, she said, but it’s a big enough group that the ones who are buying will make a difference.

But what kind of houses will they want?

“Nobody knows,” said Shan. “Survey data say they still want the same kind of houses, but there are signs that their preferences might be different.”

“They want more urban environments,” said Weiss. They’re more willing to live in a small space and willing to look at screens — a window into the entire world. “I think all of us feel less confined by physical small spaces,” he said.

Email Amber Taufen

Like me on Facebook! | Follow me on Twitter!

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Inman Connect is LIVE tomorrow! Join us and thousands of your peers from wherever you are.Register Today×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription