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The Long-Term Trends That Will Impact the Future of Housing

Forecast One BHAs a new administration is set to take office come January, many in the industry wonder how the housing market will be shaped, and what other trends will be important in the next year. According to Freddie Mac’s November Insight report, the metrics to watch are those that have a long-term influence, rather than short term impact.

"These three long-standing trends—ones that have been building quietly over decades—ultimately will have more influence on housing than the week-to-week oscillations of mortgage rates or any of a host of other short-term indicators of housing activity,” said Freddie Mac Chief Economist Sean Becketti. “These three trends affect housing and mortgage markets through their influence on both the demand for and the supply of housing. The change in income distribution shifts the demand for housing—both the total demand for homeownership and the demand for different types of housing. The rising share of land costs shifts the supply of housing—houses cost more than before because of the higher cost of the land component of the house. And land use restrictions limit the supply of more-affordable housing in richer states. No analysis of the future housing market is complete without considering them."

Of the three trends, the largest influence may come from the increasing income inequality between the “relative fortunes of low-, middle-, and high-skilled workers," according to Freddie Mac.

The analysis says that demand has increased for high-skilled/waged jobs as well as low-skilled/waged jobs, leaving out the middle class where demand has been decreasing.

Trulia Chief Economist Ralph McLaughlin shared a similar sentiment in a recent report saying metros with the lowest incomes had the highest income growth last year, a clear sign, he said, that regional income convergence is picking up.

McLaughlin’s report also said that in low-income markets in general, income growth rose about 5.5 percent as median prices rose 3 percent. This dynamic was shared with the highest income areas, where income grew 3.5 percent and median prices grew 3 percent in 2015.

“Demand for middle-skill jobs has decreased contributing to a ‘hollowing-out’ of the middle class,” says Freddie Mac. “Technology has eliminated white-collar clerical, blue-collar production and craft, and related jobs.”

To read the full Freddie Mac November 2016 Insight, click HERE.

[youtube http://www.youtube.com/watch?v=pkJwZ_CuZAA]

About Author: Kendall Baer

Kendall Baer is a Baylor University graduate with a degree in news editorial journalism and a minor in marketing. She is fluent in both English and Italian, and studied abroad in Florence, Italy. Apart from her work as a journalist, she has also managed professional associations such as Association of Corporate Counsel, Commercial Real Estate Women, American Immigration Lawyers Association, and Project Management Institute for Association Management Consultants in Houston, Texas. Born and raised in Texas, Baer now works as the online editor for DS News.
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