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What If Housing Is Done for a Generation?
http://www.zerohedge...done-generation
Quote
A strong case can be made that the fundamental supports of the housing market-- demographics, employment, creditworthiness and income--will not recover for a generation.
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Rising rates of homeownership require five conditions:
1. Favorable demographics: a cohort of potential buyers that is larger than the cohort of potential sellers.
2. Rising household formation rates: an expanding population does not necessarily translate into rising rates of household formation. If the number of people per household goes up, then the number of households can plummet even as population expands.
3. A large cohort of creditworthy potential buyers: that means buyers with savings, buyers with sufficient income to pay the mortgage and buyers with low debt loads.
4. An economy that generates rising incomes to support homeownership.
5. An unshakable belief that owning a house is a favorable and secure investment that will rise in value in the decades ahead.
If the first four conditions have eroded, then the belief in the permanence of a rising housing market will also erode.
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Labor's share of the national income has plummeted to historic lows. How can households be expected to buy a house when their real (inflation-adjusted) income declines year after year?
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Meanwhile, income has declined, especially for younger workers. Soaring Poverty Casts Spotlight on ‘Lost Decade'
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Part-time jobs and temp jobs do not generate enough stable income to support a mortgage.
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Household formation is also in a long-term decline.
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What few are willing to entertain is the possibility that housing is no longer the foundation of middle class wealth, and that its decline is structural, not cyclical.
...
It's easy to qualify people for a mortgage. The hard part is making sure they will have enough income and faith to service the mortgage for the next 30 years.
...
Rising rates of homeownership require five conditions:
1. Favorable demographics: a cohort of potential buyers that is larger than the cohort of potential sellers.
2. Rising household formation rates: an expanding population does not necessarily translate into rising rates of household formation. If the number of people per household goes up, then the number of households can plummet even as population expands.
3. A large cohort of creditworthy potential buyers: that means buyers with savings, buyers with sufficient income to pay the mortgage and buyers with low debt loads.
4. An economy that generates rising incomes to support homeownership.
5. An unshakable belief that owning a house is a favorable and secure investment that will rise in value in the decades ahead.
If the first four conditions have eroded, then the belief in the permanence of a rising housing market will also erode.
...
Labor's share of the national income has plummeted to historic lows. How can households be expected to buy a house when their real (inflation-adjusted) income declines year after year?
...
Meanwhile, income has declined, especially for younger workers. Soaring Poverty Casts Spotlight on ‘Lost Decade'
...
Part-time jobs and temp jobs do not generate enough stable income to support a mortgage.
...
Household formation is also in a long-term decline.
...
What few are willing to entertain is the possibility that housing is no longer the foundation of middle class wealth, and that its decline is structural, not cyclical.
...
It's easy to qualify people for a mortgage. The hard part is making sure they will have enough income and faith to service the mortgage for the next 30 years.
