Improving Housing Market in 2012?

As we kick off a new year, there is optimism that 2012 may mark the beginning of a turn for the better in the housing market. Tom Lawler, an independent consultant, sees potential in the continued dearth of newly built homes, a slowly rebounding job market, and a population in need of housing. Lawler is not alone. Goldman Sachs has stated that the housing-price bottom is in sight and they expect a 30 percent gain in home prices over the next decade.

The real estate market is anticipating an increase in housing demand for 2012. More specifically, Lawler is predicting an increase in headship rates, which is defined as the number of people who qualify as the head of household. Since 2005, the number of new households formed each year has dropped to less than one million. This is partly due to the fact that young adults have especially been hit by the poor job market, making them more hesitant to become heads of household. Young people have been staying in school longer, moving back in with their parents, or living with roommates. Since these are not permanent housing situations, it suggests an emerging, pent up demand for housing, Ultimately these people will be forming their own households.

The Joint Center for Housing Studies is also optimistic. It projects total household growth at about 12.5 million to 14.8 million over the next decade.

When Americans begin to look for housing, the market will be further impacted by the fact that there are relatively fewer new homes under construction. As a result, people will turn to the stock of existing homes, which will help to clear the market by purchasing homes that are now sitting empty.

Another factor in housing demand is the job market. The number of job layoffs has been steadily declining. As more people find work, they will be more able to qualify for a mortgage and more likely to purchase a home.

Glimmers of hope like this are creating optimism among those involved in the housing industry. For more information, read Loren Berlin’s article “Will Housing Market Finally Rebound in 2012?” published in The Huffington Post.