USA Property News

Home Sales Improving and Buyers Getting Older in the US

Home Sales Improving and Buyers Getting Older in the US
According to data released from the US earlier this week, new home sales are at their highest levels since 2008, bringing homebuilder confidence back to its height of 10 years ago with mortgage applications steadily increasing.

Economist say there are clear indications that the US housing market if finally starting to be a real boost to the national economy for the first time in a decade, instead of dragging it down and hampering growth as it has been.

However, there is a real difference in today's real estate market than before the recession with American home buyers getting older and buying bigger homes. According to US Census data the median age of a homebuyer in the States has gone from 35 to 43 since 1985. When the housing boom was nearing its peak in 2005, the median homebuyer's age was 39 and is now 43, the data reveals.

"We consistently tell that story of people delaying homeownership," says Skylar Olsen, senior economist at US property portal Zillow. "People are delaying things that pre-date homeownership, like getting married later and having children later".

Construction is picking up to meet the demand for larger homes among middle aged buyers in the US, with many seeking homes with at least 200m² with new homes typically having that space available, according to analysis by the National Association of Home Builders. The same research shows that back in 2000, the typical American home for sale had around 165m2 of living space.
Multi-family homes are also booming in the US as people buy homes as investment properties to rent out. In the late 1980s, people would rent for four years before purchasing their first home. Now it's at least six years.

With large homes translating into boosted profits for America's construction sector, it's not surprising that stock market funds that track homebuilders are soaring this year. The iShares US Homes Construction ETC, SPDR S&P Homebuilders ETF and iShares Residential Real Estate Capped ETF are all up about 6% or more in 2015. That's much better than the overall stock market performance, which is negative for the year.

The other common explanation for this big shift in American real estate is that young people have too much debt to buy homes, especially from student loans. However, economists at Zillow took a look at the probability that someone would buy a home with zero debt all the way up to $50,000 from student loans and found that higher student debt had almost no impact on the decision to buy a home.

America has seen a similar pattern emerge in its housing market that has been witnessed elsewhere in the world, like the UK for example. American pension savers can invest in vehicles known as Individual Retirement Accounts (IRAs), allowing them to making real estate purchases to hold as assets to grow wealth for later years.

Similarly in the UK, pension savers were boosted earlier this year when changed in regulations came into force allowing pension holders to release lump sums beyond the age of 50 to spend as they wish. This led to a surge in sales of income generating property assets in the UK and a dramatic increase in the number of more mature private landlords throughout the country.
Whatever the reasons for increasing home sales in the US, it has to be great news for the economy and also for the dollar which continues its marathon run of strength against major currencies. However there are concerns that this growth may not be sustainable and that unless the demand for affordable family housing is met, there could be trouble ahead.