On a national basis, since reaching a peak in April of 2006 before crumbling following the subprime mortgage debacle, U.S. home prices in February had recovered more than 96% of the peak value. Some states and regions are outperforming others, of course, but overall things aren’t so bad.
Unless you’re trying to buy a home in today’s market where the number of homes for sale is relatively low which drives demand (and prices) higher.
According to a new report from Gallup, half of all Americans who currently don’t own a home are planning to buy one within the next five years. Only about 20% of current U.S. homeowners plan to sell their homes in the next five years. This would seem to be good news for the homebuilding industry.
The 49% of non-homeowners saying they plan to buy within 5 years is up 8 percentage points compared to year-ago plans and up 6 points and 4 points compared to 2015 and 2014, respectively. An earlier Gallup survey reported that 61% of Americans expect home prices in their areas to rise this year. Still, that doesn’t deter determined buyers, according to Gallup:
Most non-homeowners aged 55 and older do not plan to buy homes in the near future, but most younger adults do. Fifty-eight percent of those aged 35 to 54 expect to buy within the next five years, as do 52% of those aged 18 to 34. An additional 31% of 18- to 34-year-olds plan to buy within the next 10 years, leaving only 14% in this age group not thinking of buying a home in the next decade.
Gallup also reported on who would be selling their homes over the next decade:
About half of U.S. homeowners who plan to sell their home within the next 10 years, 49%, are looking to downsize — saying they plan to buy a smaller or less expensive home than they have now. Roughly three in 10 say they are looking to buy a bigger or more expensive home. Most of the rest, 13%, indicate they will rent a new place to live.
Gallup’s survey indicates that about 70% of non-homeowners expect to buy a home within the next 10 years, indicating that the real estate market should be strong for the next decade. Gallup injects a note of caution:
However, these results also indicate that demand for homes may not keep up with supply. A higher percentage of non-homeowners plan to buy homes in the next five years than homeowners plan to sell homes. The two percentages do not need to match for supply to equal demand because there are roughly three homeowners for every two non-homeowners. At the same time, most homeowners who sell their home will also need to find a new place to live, further adding to the demand for real estate.
Some of the shortfall in housing supply can be made up by new construction, which might indicate a construction boom is on the horizon, if not already underway. But if real estate demand continues to outpace real estate supply, home prices will continue to rise and could rise beyond what most Americans can afford. To the extent that happens, many would-be homeowners may not be able to achieve their goal of owning a home.