WASHINGTON (May 12, 2016) – Relentless supply constraints and home price growth outpacing wages are testing the patience of homebuyers this year, but existing-home sales are still on track to come in at their highest pace since 2006, according to Dr. Lawrence Yun, chief economist of the National Association of Realtors®. Yun presented his midyear economic and housing forecast and was joined onstage by U.S. Sen. Elizabeth Warren (D-Mass.). Senator Warren explained with purpose the growing burden repaying student loan debt is having on young adults, the housing market and the overall U.S. economy.
According to Yun, monthly existing-home sales were uneven in the first quarter but still came in at a seasonally adjusted annual rate slightly higher (5.29 million) than last year’s overall annual pace (5.26 million). Demand has mostly remained strong – especially in the top job-producing metro areas – and is being upheld by mortgage rates near three-year lows and the 14 million jobs gained since 2010.
“The housing market continues to expand at a moderate pace in spite of the fact that home prices are rising too fast in some areas because of insufficient supply fueled by the grossly inadequate number of new single-family homes being constructed,” said Yun. “The good news is that pending sales in recent months have remained stable and should support a modest gain in home sales heading into the summer.”
Yun forecasts existing sales to finish 2016 at a pace of around 5.40 million – the best year since 2006 (6.48 million). After accelerating to 6.8 percent in 2015, the national median existing-home price is forecast slightly moderate to between 4 and 5 percent this year.
During her remarks, Senator Warren applauded Realtors® for their role in helping build America’s middle class through homeownership. Unfortunately, Warren explained, this path to economic security is being threatened by the seven out of 10 college graduates that need to borrow thousands of dollars to attend college and then spend countless years afterwards repaying the debt at high interest rates.
“Student debt is crushing young people, it’s hurting the nation’s economy and delaying the opportunity for many to buy their first home,” said Warren, who cited NAR’s 2015 Profile of Home Buyers and Sellers data on the percent share of first-time buyers remaining at its lowest point in nearly three decades (32 percent). “Every monthly payment going to reducing their student debt could instead be money going towards saving for a down payment on a house.”
On the topic of first-time buyers, Yun remarked that their ongoing absence is the missing link to a full housing recovery; this is, amazingly, during a time when conditions are ripe for a larger share of them buying homes. Job growth has been strong for multiple years, rents have soared in many areas and mortgage rates are historically low. Unfortunately, a multitude of factors such as increasing home prices amidst flat wage growth, the lack of available starter homes and repaying student loan debt is thwarting many young would-be buyers.
“Spectacularly low mortgage rates mean today’s prospective homebuyers are the luckiest in a generation but the unluckiest in actually becoming homeowners because of the roadblocks hampering their ability to buy,” added Yun.
Warren concluded her remarks by urging Congress to pass the “Bank on Students Emergency Loan Refinancing Act,” which would give a much-needed break to student debt borrowers by giving them a chance to refinance their federal and private student loan debt at the same low rates offered to new borrowers in the federal student loan program.