Skip to comments.Limited household formation threatens mortgage market (Only 51% of adults are married)
Posted on 12/14/2011 7:37:58 PM PST by 2ndDivisionVet
Single-family originations will likely dip in 2012 because of fewer refinances, according to Frank Nothaft, chief economist at Freddie Mac.
The market will see a refinance burnout, Nothaft said, with a dwindling pool of eligible borrowers and higher mortgage rates by the second half of 2012.
Nothaft projects $1.3 trillion in single-family mortgage originations in 2011, compared to $1.14 trillion in 2012 and $1.07 trillion in 2013.
The Freddie Mac projections for 2012 come as a Pew Research Center study showed a record-low number of adults married in the U.S. About 51% of all adults were married as of 2010, down significantly from 72% in 1960.
The Pew study released Wednesday also found only 20% of adults ages 18 to 29 were married, a sharp decline from 1960's rate of 59%.
Typically, Nothaft said younger, newly married couples prefer to move out of their parents' houses and form their own households. Using U.S. Census Bureau data, Nothaft found an increase of 800,000 households dating back a year from mid-2011, making for a relatively weak growth rate.
The numbers of households averaged an increase per year of about 1.1 million dating back to 2000, according to the Census Bureau.
It's not known, the Pew report said, whether younger adults are abandoning or putting off marriage. It's also unclear if it's related to the economy, but Nothaft said it's likely the reason for fewer marriages and, therefore, households.
Nothaft said to expect more multifamily originations in 2012 due to refinance opportunities and high demand for rentals. About 1.4 million households moved into rental housing in the year prior to mid-2011, he said.
"It's because many households are reluctant at the current time to enter the purchase market," Nothaft said. "This will tend to be younger couples and couples that have been placed out of homeownership because of default and foreclosure."
In the past year, homeownership rates dropped to 21.9% for people younger than 25, and to 34.7% of 25-to-29-year-olds.
Burgeoning student loan debt might also restrict younger adults' entry into the housing market, according to John Burns Real Estate Consulting. The firm said student loans debt now totals $865 million, or $25,000 a student.
"Student loans are going to be yet another hurdle for the housing market to overcome," consulting firm analyst Rick Palacios said.
On his outlook of general housing activity, Nothaft said the market will improve in 2012 but not to the point of a "full-fledged recovery."
I’m a little more worried about the implications to the social fabric of the country than how it affects the housing market..
71% have been married. Clear majority. And many singles and unmarried couples buy houses together.
“Im a little more worried about the implications to the social fabric of the country than how it affects the housing market.”
I’m with you. We can thank ‘tolerance’ and no-fault divorce for this crap. Not to mention the lack of religion.
Another page added to Freakonomics.
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