Tags: Neil Irwin | housing | young adults | homes

NYT's Irwin: Housing Market Hit by Lack of Demand From Young Adults

By    |   Monday, 28 April 2014 10:07 AM

Young adults are shying away from buying new homes, blunting the strength of the housing rebound and hampering economic growth.

Existing home sales fell 0.2 percent in March, the third straight monthly decline. Home investments now represent a smaller share of GDP than at any time since World War II, according to Neil Irwin, a senior economics correspondent for The New York Times.

If home building just rebounded to its post-war average as a share of GDP, economic growth would soar to 4 percent from the 2.6 percent recorded in the fourth quarter, he notes.

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Young adults simply aren't moving away from their families to start households of their own. From 2007 to 2013, total households climbed by an average of 569,000 a year, less than half the 1.35 million rate from 2001 to 2006, according to Irwin.

Young people have been hurt by the weak job market. Just 62.9 percent of those aged 20 to 24 were employed in March, down 7 percentage points from the spring of 2007.

"The younger generations do not seem to have a significant lower preference for homeownership," David Crowe, chief economist of the National Association of Home Builders, tells Irwin. "They just can't do it now."

"The United States economy has been stuck in a vicious cycle: A moribund housing market saps the economy of strength, and the ensuing weakness — high unemployment, slow wage growth — means that fewer people are leaving the nest for a home of their own," Irwin writes. "Those who do are choosing smaller rental apartments that generate less spillover benefits for the broader economy."

As for the overall housing market, "it's the reduction in affordability, the lack of inventory, also weak growth in median household income," Ryan Sweet, a senior economist at Moody's Analytics, tells Bloomberg.

"All these are contributing to the sluggish recovery in housing. It's going to raise concerns about the strength of the housing recovery."

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Young adults are shying away from buying new homes, blunting the strength of the housing rebound and hampering economic growth.
Neil Irwin, housing, young adults, homes
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2014-07-28
Monday, 28 April 2014 10:07 AM
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