Future Household Formation in California to Shrink Inventory

Robin Fenchel October 28, 2012

As more homeowners are able to stay above water due to more lender requirements before foreclosure, other factors are also at work driving down the available inventory for Californians as the economy repairs: many people have delayed “household formation” for economic reasons. They’ve been renting, or have stayed with their parents after college instead of forming households of their own and starting families. As the economy improves, however, California’s pent-up demand could shrink the inventory. A recent report on household formation by the California Association of Realtors estimates the rate at which we can expect these first-time buyers to form households. Decreased immigration rates have also contributed to this falling rate of household formation.
According to senior economist Selma Hepp, Ph.D., while the national average for home formation has traditionally been about a 1.5% increase each year, but since the recession began in 2008, the rate of home formation in California has decreased about 1% each year.With single-family market starting to improve, a report from the Joint Center for Housing Studies at Harvard expects both home prices and home sales to continue to improve, as the National Association of Realtors’ numbers have indicated. In addition, gross rent prices have even exceeded the average mortgage rate, suggesting as this demographic of first time buyers who have been suffering in the job market during the recession may finally make the move to own homes.We are real estate experts in Irvine, and would love to assist you with your real estate needs. Please contact us if we can answer any of your questions, or give you tours of some of Irvine’s beautiful homes.

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