December 9, 2011
Most agents are well versed in the local information and news that affect their neighborhoods. But, the national stats and over-simplified headlines make it hard to keep up with what’s really happening in the big picture.
Here are a few key indicators and some expert advice on what they mean for today’s markets from Trulia’s Chief Economist Jed Kolko.
Unemployment among 25-34 year-olds & future housing demand
Many life changes happen for young adults between the ages 25 and 34 that affect housing. From developing careers to making decisions about marriage and households, Jed Kolko, Trulia’s Chief Economist says, “A key measure for housing demand and homeownership is the unemployment rate for this group and the share of this age group that is employed.“
In a recent post on Trulia’s Insights Blog, Kolko offered a great example of how Unemployment for this age group has affected home sales:
“During and after the recession, household formation dropped for this age group, and more of them than ever are living with parents or other adults rather than renting or owning their own place. These folks will wait to form their own households and consider homeownership only when their job prospects improve.”
Local construction activity & spending
You don’t have to be an economist to understand the impact of shifts in housing supply and demand. The more supply of a certain item exists, then each individual item is less valuable to buyers. For example, if there is only one Nintendo Wii left on the shelves, people would be willing to pay more to have it versus if there were hundreds available. That’s why Kolko says it’s important to watch your local construction trends:
“New construction activity is a good cue to what’s going to happen in your local market: more new construction today will mean more inventory for buyers or renters — and more competition among sellers or landlords — in the near future.”
Those effects clearly relate to prices, but construction starts don’t just mean increased inventory but they also have a spending effect. Kolko says, “New construction puts more money in the hands of workers – and their incomes will kick-start spending that will boost demand for housing.”
Vacancy rates and price changes
Most agents know, vacancy rates mean housing supply. Smart agents know these vacancies affect home prices. But, by how much?
Kolko says, “The effect of vacancies on nearby home prices is strong: one academic study estimates that a vacant home can lower the price of nearby homes within 500 feet by as little as 0.7% and as much as 10% — depending on whether the vacant home is a foreclosure or just neglected.”
When you see the housing statistics, whether national or local, remember that the story and the effects are often deeper than simple numbers. To get updates on the latest housing statistics and explanations you can understand, check out more from Jed Kolko on Trulia’s Insights Blog.
About the author
Fiscal policy issues and political economic uncertainty will take center stage in determining the degree of consumer and business activity—key drivers of economic growth—during 2012, according to Fannie Mae’s (FNMA/OTC) Economics & Mortgage Market Analysis Group. The forthcoming presidential election, potential expiration of tax provisions for businesses and households, and the ongoing healthcare debate are among the uncertainties expected to keep the economy moving at a moderate pace with growth of 2.3 percent expected for the year. Moreover, contagion effects from the sovereign debt crisis in the euro zone, which appears to be slipping into recession, are expected to remain as a primary risk to growth in 2012.
We have taken the stance that real estate is currently a great investment. There have been MANY that have let us know that they think we are crazy. Today, let’s look at a few prominent people, media sources and one very important group that agree that now is the time to buy.
