As the single-family housing market continues its recovery from the Great Recession as projections for this year show further gains in single-family volume, is there a way to define what a normal market looks like?
Frank Nothaft, for CoreLogic, writes: In coming years, the “new normal” in the housing market may well feature these three elements: continuing low levels of mortgage rates (albeit higher than today); a lending market dominated by purchase-money and with a growing amount of home-equity loans; and a sales-turnover pace that is lower than the industry had been accustomed to.
While home sales in 2016 are projected to be at the highest level since 2007, the level of home-sales turnover, in other words, home sales measured relative to the housing stock, sales this year are projected to remain more than 10% below the sales pace in each year from 2000 through 2003.
The causes of a slower sales turnover are varied. Changes in technology and the modern office may have contributed to lessened labor mobility. The peak birth cohorts of the Baby Boom generation are now aged in their late 50s – often an age when household mobility is less. Senior households are living longer and prefer to age in place. Over four million households remain underwater and are reluctant to sell at a loss, and many others have had their adult children move back in with them. These and other factors may translate into a normal sales turnover pace that is slower than before the housing boom-and-bust.