Economist sees consumer confidence on upswing, 'echo boomers' a force in recovery
Norwich - Low interest rates, reasonable prices and an improving economy will likely nudge up home prices in the coming year, the chief economist of the National Association of Home Builders predicted Wednesday night.
David Crowe told a crowd of about 60 members of the Builders Association of Eastern Connecticut attending the annual Housing and Economic Outlook review at the Holiday Inn that the real estate market nationwide has likely turned the corner. He expects price growth will be in the 2 percent range over the next few quarters, in what he calls "a softer, longer recovery" than usual.
Crowe said pent-up demand from baby boomers and their offspring, known as "echo boomers," means prices "have finally found a bottom" and homes languishing on the market - particularly lower-cost ones - are going to start moving at a brisker pace. Echo boomers, with the leading edge just turning 30 and tired of living at home or with a roommate, seem a particularly ripe market for getting on with their lives and changing their living arrangements, he said.
"I can't be absolutely sure they'll buy a house - they may rent instead - but they'll absorb that excess inventory," he said.
Crowe pointed to several factors adding to the likelihood of a real estate turnaround, including the fact that single-family home sales nationwide are up 25 percent from their lows in 2009, yet still are only two-thirds of what they should be given underlying demand.
"There's been some rebound already, and I expect that to continue," he said.
While builders are still worried about consumers' ability to sell their old home to buy a new one as well as about the availability of credit, other factors impeding sales have decreased over the past year, he said. One of those, he said, is consumer confidence, which was better than expected in the most recent reading.
What's more, 39 states saw a decline in the percentage of homes in foreclosure between the fourth quarter of 2009 and the same period the previous year, with 42 states showing a similar improvement between the third and fourth quarters.
On the downside, builders are still lamenting a lack of credit even as bankers for large national financial institutions are claiming an easing of lending policies.
"Somewhere, somebody is not telling the truth," Crowe said.
Despite housing declines locally averaging about 11 percent annually over the past two years, Crowe pointed out that real estate in Connecticut is still priced 36 percent higher than it was just seven years ago.
At the same time, he said Connecticut housing has become more affordable relative to residents' income, declining from a high of 5.4 times income to a current level of 4.2 times income - still about a point higher than the national average.
John Bolduc, chief executive of the Eastern Connecticut Association of Realtors, said the big opportunities in today's homebuilding market are at the lower end of the spectrum.
"McMansions won't sell, but affordable houses will," he said. "Homes in the over-$400,000 range are at a 24-month supply - that's two years."
Bolduc added that buyers are really concerned today with energy efficiency.
"Building green is going to put green in your pocket," he said.