In US News & World Report, Robert Dietz, an economist with the National Association of Homebuilders, asks the question, “What Happens to the Housing Market When the Investors Leave?” Mr. Dietz points to the fact that the Great Recession forced many younger individuals to delay the formation of new households by moving back in with their parents and/or delaying marriage. Implicit in his opinion piece is the assumption that there is pent-up demand for new housing once these individuals return to forming new households.
This is not an unreasonable assumption. However, it may be based more on wishful thinking than actual data. Recent college grads should hold the best prospects for forming new households and re-entering the housing market. Unfortunately, Mr. Dietz does not take into account that the tepid pace at which jobs are being created has left a significant portion of this demographic either unemployed or underemployed. Combine that with the fact that this same group has over $1 trillion in outstanding college debt to be repaid, more of which is going into default every day, and it begs the question, even if they want to form new households or buy a new home, do they have the means to do so?
If economic and job growth does not materially improve, it is hard to see where the resources will come from for them to do so.