Despite a decline in August new-home construction, long-term housing demand remains strong with 80 percent of current homeowners planning to buy again and 59 percent of renters aspiring to be owners, a real estate listing service reported Tuesday.
Home ownership remains core to the American dream, though the biggest obstacle for consumers today is saving enough for a down-payment, said Jed Kolko, chief economist for San Francisco-based real estate website Trulia.com.
Trulia’s biannual survey showed 70 percent of all respondents viewed home ownership as part of achieving their personal American dream, unchanged from January. The percentage increases with age, rising to 76 percent for those 55 and older.
More than half (57 percent) of current homeowners said owning a home is among the best long-term investments they could make, putting it ahead of 401(k) and other retirement accounts (52 percent), Kolko noted.
Even among 18- to 34-year-olds, who have the lowest home ownership rate in the country, 65 percent of survey respondents said their American dream includes owning a home.
It’s that youngest age group holding back demand for home ownership. They’ve yet to leave home or, in increasing numbers, they’ve moved back in with parents and family, Kolko said.
“But that demand won’t go away permanently,” Trulia’s economist said in a conference call. “That’s demand being pushed to the future.”
Falling home prices and low interest rates aren’t enough to overcome many of the obstacles to ownership, the survey found. Saving for a down payment is the biggest obstacle (51 percent), followed by qualifying for a mortgage (36 percent), having a poor credit history (34 percent) and unable to pay off existing debt (31 percent). Only 13 percent cited declining home values.
Las Vegas has seen median existing-home prices fall more than 60 percent from their peak, to $107,000 in August, according to Home Builders Research. And homebuilders pulled just 338 new- home permits in August, bringing the total for the year to 2,649, a 25.8 percent decrease from a year ago.
The Commerce Department says builders began work on a seasonally adjusted 571,000 homes last month, a
5 percent decline from July. That’s less than half the 1.2 million that economists say is consistent with healthy housing markets.
Single-family homes, roughly two-thirds of home construction, fell 1.4 percent. Apartment building plunged 12.4 percent. Building permits, a gauge of future construction, rose 3.2 percent.
Hurricane Irene also slowed construction in the Northeast.
In Las Vegas, it could take some time for demand for new-home construction, given the excess supply and shadow inventory of homes in foreclosure, Kolko said.
“I interpreted the report today as being pretty much flat in terms of housing construction everywhere except in the Northeast, and remember it was during the time of Hurricane Irene,” Kolko said. “At the national picture, new-home construction is flat, but in Las Vegas, where there was so much new construction over a short period, new-home construction will remain low for quite some time.”
Kolko said he’s optimistic that long-term housing demand will recover, even though today’s housing prices and new- home starts tell a different story.
“But the homes that people will want in the future will look different than today’s housing stock,” he said. “Retiring baby boomers won’t want big suburban houses. They care more about easy access to restaurants and retail and will be willing to trade down.”
Trulia’s survey found a shift away from McMansions and suburban living, reflecting a change in consumer spending habits. Homebuyers in today’s postbubble economy have become more practical and less aspirational, Kolko said.
“It’s partly due to the economic recession, but it could be part of a shift toward smaller-size homes,” he said. “Baby boomers are downsizing and thinking about a smaller environmental footprint. People are looking at smaller homes in urban areas, not suburban areas. People are willing to trade down to be closer to work. Shorter commutes are especially valued by 18- to 34-year-olds.”
They still like to dream big. Twenty-seven percent of properties viewed on Trulia.com were 3,200 square feet or larger, Kolko noted.
Trulia’s survey was conducted online in August within the United States by Harris Interactive, with 2,207 adults queried, including 1,392 homeowners and 758 renters. The online surveys are not based on probability sample and therefore no estimate of theoretical sampling error can be calculated.
Respondents for the survey were selected from among those who have agreed to participate in Harris Interactive surveys.
Contact reporter Hubble Smith at firstname.lastname@example.org or 702-383-0491.