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Housing Recovery to Occur in Two Phases: Demand Institute

The housing recovery will come in two phases. First, home prices will rise by just under 1 percent in the second half of 2012. In 2013, prices will rise by 1.5 percent, then go up another 2.5 percent in 2014. For the second phase, home prices will increase 3 to 3.5 percent between 2015 and 2017. These are the predictions from a report released by the ""Demand Institute"":http://www.demandinstitute.org/, which is jointly operated by ""The Conference Board"":http://www.conference-board.org/ and ""Nielsen"":http://www.nielsen.com/content/corporate/global/en.html.


The report, titled The Shifting Nature of U.S. Housing Demand, stated investors who buy rental properties will lead phase one of the recovery, as opposed to buyers who purchase properties as their own residence.

However, Bart van Ark, chief economist at The Conference Board and co-author of the report, said the expectation for homeownership rates is not expected to change in the long-term.


""Over 80 percent of Americans in recent surveys still agree that buying a home is the best long-term investment they can make. What will be intriguing to watch is how their aspirations around home ownership are affected by this period of extended austerity,"" he said.

During the first phase, the demand for rental properties will come from young people hit hard by the recession and immigrants.

As investors buy up the oversupply of homes to take advantage of low prices and rising rents, the report also predicts that this will lead to the absorption of the existing surplus, which will clear by the start of 2015.

Then, phase two will begin with higher home prices and a return to home ownership.

According to the report, currently, 11 percent of homeowners say they would like to sell their home, but about half of these homeowners say they aren't listing their property because they won't get the price they want.

The prediction is that once prices rise by 3 percent in 2015, homeowners will start to return to the market, increasing the volume of home sales.

Credit will also become more accessible as standards ease, leading to more renters to become buyers. The report stated a crash in demand for rental properties is unlikely.

According to the report, about $7 trillion in American wealth was lost when home prices dropped 30 percent after the housing bubble burst.

About Author: Esther Cho


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