The housing trade is for the most part influenced by a few recurring issues, which includes interest rates, employment levels, demographic shifts and consumer confidence. Each of these measures, with the exception of consumer confidence, presently sustains a well-built housing market. In particular, interest rates are still low by historical standards, and the yield curve infers that rates will continue to be dispirited in the anticipated future. Likewise, unemployment levels are anticipated to stay low in the upcoming years. Several industry specialists project numerous significant elements to keep housing demand strong over the next decade, including aging baby boomers who are entering peak income and wealth years; strong immigration trends resulting to new household formations; increasing homeownership rates; an aging housing stock (approximately 36% of existing home were built before 1960); and better financing options for buyers. The Homeownership Alliance predicts that these demand drivers will lead to 1.85 to 2.17 million new U.S. housing starts per year through 2013. In addition, evidence exists which imply that supply constraints will aid in stabilizing new home demand even if the housing market becomes disagreeable.
Recent low mortgage interest rates have dramatically increased housing affordability for many Americans creating a concomitant increase in demand. This demand, however, has not been met with a proportionate increase in supply, creating a very tight residential real estate market that has driven prices upwards. Because the increase in prices was driven by demand stimulated by the reduced cost of mortgages, this rise should not be considered to be a signal of overvaluation in the housing market. In contrast, although new home inventory is currently rising, it remains low relative to current sales. The current supply of new homes on the market is 3.9 months; among the lowest ever.
