You’ll have to forgive me this morning. My planned birthday party for Barry was canceled, as his ailing father took a turn for the worse on Saturday and died yesterday. So even if the party metaphor seems a bit strained, I’d appreciate your indulgence.
What happens if you throw a housing party and no one attends? The National Association of Realtors is afraid that no one will be RSVP’ing to the party quite soon.
I automatically set aside the blather about the media-driven “psychological factors” NAR claims are making buyers afraid to put on their party dresses, and I think we all comprehend the tightening of credit has kept the cash-less from joining in the festivities.
But looking at a drop of over 10% in existing home sales since last year, and a backlog of almost nine months of inventory, NAR’s replacement cheerleader has decided to stop raving how much fun the party will be like his predecessor David Lereah. Instead, Lawrence Yun, the new NAR senior economist, thinks the party-goers have created new parties of their own design.
OK, dropping the party metaphor…
Where, then, have the potential buyers gone? Per Mr. Yun, "household formation has slowed dramatically since late 2006, implying that many people are doubling-up -- they’re adding roommates or moving in with parents."
The Joint Center for Housing Studies at Harvard noted in its recent report that "household growth between 2005 and 2015 should exceed the strong 12.6 million net increase in 1995-2005 by some 2.0 million." And data from the U.S. Census indicates that 1.03 million households were added in 2004, 1.64 million in 2005, and 1.34 million in 2006. Yet Mr. Yun and NAR project only 415,000 new households formed by the end of 2007.
I have clients who buy with Mom and Dad, two sisters that buy a house with all their kids together under one roof, and large immigrant families that have members of three different generations on the contract, so I believe the NAR figures may not be inaccurate. But with few exceptions, those that buy jointly with others do so out of necessity, not convenience: they can’t find a house they can afford on their own.
Kate & Allie, anyone?