Wage stagnation and weak consumer confidence among young adults are two factors delaying a housing recovery, according to a new report from IHS Global Insight.
The report was presented to the United States Conference of Mayors this week.
According to the report, house prices are still searching for a bottom at a time when wages are stagnant and young adults are absent from the home-buying segment. Of those that do apply for loans, tighter underwriting is ending many of their bids.
The report says lackluster housing demand from young adults is mostly tied to other economic factors — namely wage growth and market confidence — both of which are lagging behind, the report said.
As an example, the study points out that the median real income for U.S. households in 2010 hit $49,455. Comparatively, this is 7.1% lower than the median household income of $53,252 (in 2010 dollars) back in 1999.
“Demand among young adults for new housing is tied to their employment prospects,” the report said. Even though the nation added 137,000 jobs per month in the last quarter, unemployment remains at 8.5%.
Even with a full 11 months of 2012 ahead, the IHS Global Insight report for the mayors’ conference predicts only moderate spending due to high debt burdens and a weak labor market.
One positive, the report says, is IHS’ prediction that housing starts will increase to 730,000 units in 2012, up from 610,000 last year. These starts are likely to be tied to a boom in the multifamily segment since pent-up demand is already surfacing in the rental market, IHS said.
Write to Kerri Panchuk.
