Market Overview

Residential Electric Consumption Mirrors Growth in Home Ownership


Dennis McGill, director of research for Zelman & Associates in New York noted an obvious trend in residential electric consumption that mirrors the growth in home ownership. He also cited the growth in young adult employment, which is driving the real estate sector.


McGill echoed the statement of Eric Belsky, managing director of the Joint Center for Housing Studies at Harvard University, who said that the growth in the stock market and the recovery in housing along with pent-up demand are major factors driving the economy that is also boosting the real estate segment.


“There are three federal surveys that measure household growth and that are inconsistent, but we had real growth in 2012 that fell back last year,” Belsky said.  “Even the survey with the strongest household growth shows we’re a million below where we should be, but we’re probably two million below. We could see a notable uptick in household formation later this year.”


According to McGill, the percentage of 24 to 34 year old married couples has risen since the last recession, but they are delaying a transition to homeownership. Zelman believes that the majority of this recent change has been due to recessionary impacts that should start to unwind.


McGill said their analysis shows the existing-home inventory relative to the number of households in the first quarter of this year is 30 percent lower than the average of the past two decades. In addition, total sales closings in 2013 were 20 percent lower than the 25-year average. “If we don’t bring capacity back to the market, home prices will continue to rise strongly,” he said.


A Zelman consumer survey shows most young adults believe a lack of savings for a downpayment is their biggest hurdle to obtaining a mortgage, but most of them think they need a much larger downpayment than is actually required.


For example, 25 percent believe they need a downpayment of 16 to 20 percent, and another 15 percent believe they need a downpayment of more than 20 percent. However, the actual requirement for an FHA loan is 3.5 percent.


Even with the well-known debt issues, nearly one-quarter of people under the age of 35 are debt free, which is better than the historic average. In addition, the Zelman survey shows that contrary to fears, there is no correlation between student loan debt and household formation. “A lot of this is a recessionary impact that we think is overlooked,” McGill said.


For his part, Belsky noted there are nearly three million more young adults who lived with their parents in 2012 than in 2007, and the median incomes for all young adults have declined since the great recession.


According to the Federal Reserve Bank of New York, student loan default rates have soared from just over 6 percent in 2003 to nearly 12 percent last year. Student debt is hurting credit scores and hindering the ability of some young adults to qualify for a mortgage; it could be a problem for as many as one in 10 renters who are in their 20s.


The Joint Center for Housing Studies projects household growth to rival or top the annual average pace from 1995 to 2000, and projects 76 percent of the growth over the next decade will be from minority households. The greatest increase is expected to be among households age 65 and older.


According to Fannie Mae, roughly nine out of 10 people under the age of 45 expect to buy a home in the future, but Belsky said mortgage underwriting standards are dramatically tighter, which disproportionately impacts minorities and those with lower incomes.


The real estate industry can take advantage of its real estate market’s steady growth by using disruptive virtual tour technologies to market their listings. Realbiz Media Group, Inc. (OTCQB: RBIZ) develops proprietary video marketing software that agents and their brokers can use to promote their virtual tour listings online. The company offers a Virtual Tour Program that allows real estate sellers to create virtual tours and presentations that are optimized for mobile viewing and could be syndicated through social media for only $29.95 a month.


The program is equipped with a video search engine optimization (VSEO) tool that automatically generate meta tags and descriptions for virtual tours and listings agents have uploaded to the platform so that they would be found easily by consumers online.


The program also has tools for creating QR codes, e-flyers, and seller reports as bonus features.

To learn more about Realbiz Media and its products, contact or call 1.888.REAL.BIZ (888.732.5249).

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.


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