Older, More Cautious First-Time Buyers
“Low interest rates and relatively low prices can take the housing market only so far. For the market to truly heal, the economy must also heal.”
–“Who Wants to Buy a House“; The New York Times (9/28/2013)
My clients know that I regard the housing market as a dependent variable, not an independent one.
Translation: it depends on other factors, starting with the overall economy, employment, wage growth (or not), interest rates, etc.
So, if you want to predict where the housing market is headed, it’s easy — just figure out what all those other variables are going to do.
Note that some of these variables are local; others — like interest rates — are national (if not global).
Housing Drag(s)
That said, there are two things in particular that are clearly dragging on today’s still-recovering housing market — and cast a cloud over the short and medium range outlook*: 1) a weak economy, and 2) burdensome student debt that’s especially hard to shed in . . . a soft economy (see #1).
Here’s from The New York Times Op-Ed page:
“Many workers age 25 to 34, including many well-educated workers, now find themselves in low wage jobs. And many in that group, though out of school, are still paying for college. Combine low wages with high student debt, and homeownership becomes an impossible dream.
All of which helps explain why many 25- to 34-year-olds ” 10.1 million in the latest census data” are living with their parents, other relatives or friends. While some of them may be saving for a down payment, more than two in five would fall below the poverty line if they were on their own.”
—The New York Times
I’m seeing abundant evidence of the foregoing amongst my own clients.
Namely, plenty of first-time Buyers who are entering the market in their early 30’s instead of, say, their mid-to-late 20’s, then spend lots of time with their lenders discussing their student loan payments (outstanding balance, any prospective interest rate changes, etc.).
*“In the long run,” Keynes liked to say, “we’re all dead.”
