It’s time to clear a few things that have been lingering around my desk, bits and pieces of market news that together explain some of what’s happening with today’s housing market and how it may change in the near and distant future.
More would-be buyers opting out of homeownership
The most popular theory about why more houses aren’t being sold: There simply aren’t enough properties on the market to go around. But according to a new study from Experian, one of the big three credit repositories, a big chunk of what would ordinarily be potential buyers have opted out of homeownership.
More than a quarter of the 1,000 people queried in a telephone survey in late June — 27 percent — told Experian that they have no interest in owning, not now and not five or 10 years from now. That’s up from 19 percent when pollsters asked the same question a year ago.
Another big reason: Folks want to remain mobile. Nearly two in five — 37 percent — want more flexibility to relocate than owning a house allows.
And then there are the two issues of cost and maintenance. One in four — 26 percent — have little desire to carry as much debt as is required to purchase a house, and the same percentage are happy that their landlords pay for upkeep.
Surprisingly, perhaps, 11 percent don’t think owning real estate is as valuable as it used to be, and 22 percent want to invest in something other than a home of their own.
Credit also is a concern. Some 43 percent told pollsters that they have applied for a mortgage in the past but were rejected. More than half cited their poor or limited credit histories, insufficient incomes and outstanding debt as the main reasons why they were turned down.
A small number also said their spouse’s poor credit histories and the lender’s inability to verify their incomes also played a part in their rejections.
Anticipating a future with driverless cars
The year 2037 is still far off. But looking out 20 years from now, researchers at the John Burns Real Estate Consulting Co. in California boldly predict that when fully autonomous vehicles (AVs) become commonplace, the housing sector will change significantly.
Eventually, AVs, aka driverless cars, will put more money in consumers’ pocketbooks as autos switch from a consumer good to an on-demand service, freeing up some extra dough that would have been spent on monthly car payments and maintenance, Director of Research Rick Palacios surmises.
This, in turn, will bring about major shifts in the housing sector. According to Palacios:
- Prime but outmoded real estate — parking lots, auto dealerships, gas stations — will be replaced by small new home projects, adding supply to historically supply constrained locations.
- That will put a damper on drive-until-you-qualify markets beyond suburbia, but only for awhile. Once the majority of infill sites are repurposed, these locations will re-emerge. A long commute, yes, but by then AVs will allow people to sleep or work while the vehicle drives itself.
- Urban employment will be back in vogue as repurposed real estate will allow folks to live closer to city centers.
- Density will rise because streets won’t need to be as wide. There won’t be a need for massive driveways or two, three or four-car garages, either. As a result, people will be buying homes in which 100 percent of the space is truly livable.
- Construction costs will decline as transportation expenses for moving building products from plants and warehouses to construction sites dwindle. Also, construction time should fall as moving products becomes a 24/7 operation.
- The elderly will remain in their homes longer while aging in place because they will remain independent even after they lose their right to drive. And as a result, the remodeling market should flourish as seniors and retirees upgrade to make their places more livable in old age.
- How this all shakes out “is based on what we know today,” says the Burns chief researcher. Everything is subject to change, he adds, depending on government policies, which are difficult to predict.
But “all in all,” Palacios says, “we expect the advent of AVs to benefit the overall housing market and greater economy.”
The ominous inventory problem
The latest report on pending home sales from the National Association of Realtors (NAR) contained this ominous quote from NAR Chief Economist Lawrence Yun:
“Buyer traffic continues to be higher than a year ago, the typical listing has gone under contract within a month since April, and inventory at the end of July was 9.0 percent lower than last July. The reality, therefore, is that sales in coming months will not break out unless supply miraculously improves. This seems unlikely given the inadequate pace of housing starts in recent months and the lack of interest from real estate investors looking to sell.”
Toward that end, it is somewhat heartening to know that homebuilders around the country report that acquisition, development and construction financing continues to loosen.
“Though some concerns lurk, lending standards remain broadly supportive of continued loan growth,” said Michael Neal, an economist at the National Association of Home Builders.
Lew Sichelman’s weekly column, “The Housing Scene,” is syndicated to newspapers throughout the country.