Tags: household | formation | home | sales

Economists: Weak Household Formation Weighs on Home Sales

By    |   Friday, 21 March 2014 09:46 AM

Existing home sales fell in 0.4 percent in February to the lowest level since July 2012, and real estate experts say a shortage of new households is playing a major role.

New households are formed when people move out of a home that they share with others, such as their parents, and into a home that they purchase or rent for themselves.

"Housing is underperforming because the household formation has really stopped growing, which is a mystery in itself," says Lawrence Yun, chief economist for the National Association of Realtors, CNBC reports.

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Approximately 550,000 new households are being created a year, the lowest rate since recordkeeping began at the end of World War II, according to Federal Reserve economists, Realty Biz News reports. Through 2006, an average of 1.35 million households were created annually.

Part of the problem is that young adults are having trouble finding jobs that would pay their rent or mortgage.

"There are a lot of kids who are shacking up with their families, and probably would like to be going out and acquiring places of their own, whether it's an apartment or a home," Federal Reserve Chair Janet Yellen said in her press conference Wednesday.

Rising home prices and mortgage rates also have hurt housing sales, experts say.

"There are some headwinds out there," Robert Dye, chief economist at Comerica, tells Bloomberg. "Housing affordability has come down a bit as mortgage rates have come up from recent historic lows. The weather was a factor, and we expect that to be turning around shortly."

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Economy
Existing home sales fell in 0.4 percent in February to the lowest level since July 2012, and real estate experts say a shortage of new households is playing a major role.
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2014-46-21
Friday, 21 March 2014 09:46 AM
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