If you ask a panel of 107 housing and finance experts how long it will take the housing market to recover, you might not like the answer.
It could take another five years before the housing market returns to normal, 40 percent of those panelists said; another 30 percent think a normal market is up to two years away, according to results of the latest Zillow
Home Price Expectations Survey.
The consensus among the experts, according to the survey, is that slow household formations among millennials combined with their relative financial instability are the two big troubles holding the housing recovery back. Millennials cannot save for a down payment — or anything else — due to high rent, and are almost required to live with roommates to pay that
rent, and that holds down housing formations.
The U.S. added only about 650,000 households between March 2013 and March 2014. The U.S. saw about 1.3 million household formations in each of the two years before that, according to the U.S. Census Bureau. In October, the median rent price in the U.S. was above $750, the highest in 20 years.
One other generational factor: retired baby boomers are choosing to stay in their homes rather than selling and downsizing, which puts a strain on inventory.
“We’ve reached a point in the recovery where the only real cure-all is time,” said Zillow Chief Economist Stan Humphries in a press release. “The market remains very challenging for younger, first-time home buyers who face an uphill battle saving for a downpayment, qualifying for a
mortgage and finding an affordable home to buy.”
Zillow’s headline for the survey was “First-time homebuyers’ weak finances holding back housing market,” which may be true. The median household income in the U.S. was $51,900 in 2013, which is on par with the mid-1990s, and 8 percent lower than 2007. The unemployment rate in the U.S. for
persons age 25 to 34 was 6.2 percent in October, higher than the 5.8 percent for all adults, according to the U.S. Bureau of Labor Statistics.
Other predictions the panelists made: median home values would end 2014 up 4.8 percent; values would grow in 2015, but slower, up 3.7 percent over 2014 by next December; home prices would not go back to the 2007 peak until the beginning of 2018.
On the positive side, about 20 percent of panelists think the housing market has recovered, or will within one year.