Why so many foreclosures? - Foreclosures aren't the cause of today's housing surplus--changing demographics are. The excess supply and its persistence are directly linked to the increase in homeowners over age 55 who want to sell and downsize, coupled with the decrease in number of 30- to 45-year-olds who want to buy. Economist William Lucy says this means that the path to a housing market rebound doesn't lie in new construction, but in rethinking housing needs based on changing demographics. He says, "Surplus housing is not caused by either excessive new construction or by foreclosure," noting that only 20% of housing units for sale or sold in 2009-10 were new houses and foreclosures.
From 2000 to 2009, the number of homeowners 55 and over who may want to sell increased by 8 million, while the number of potential 30- to 45-year-old homebuyers decreased by 3.6 million. The ratio of aging baby boomers to young adults was 5 to 1 in 2010, a dramatic increase from 3.5 to 1 in 2000 and 3 to 1 in 1990.
"These ratios are important," Lucy says, "because 80% of households 55 and over are homeowners, and therefore include many who want to sell, while under age 30, less than 40% are homeowners, so they include many potential homebuyers. There are simply too many sellers and too few buyers."
The demographic shift, combined with the desire by both groups of homeowners for convenient locations, smaller units and less driving hassle, is contributing to the excessive number of existing houses, which are located primarily in suburbs. Lucy says, "Location is more important than ever, and how location is interpreted has changed." With foreclosures and repossessions contributing to housing surplus predominantly in the outer suburbs and suburbs, these locations are not considered as being safe investments or as having good resale potential for 30- to 45-year-olds, who later need to sell for career advancement. He argues that given these conditions and trends, new construction in the outer suburbs, which has been the trend since 1946, is no longer viable, and says, "It is time to move on to a richer, more varied and enhanced quality of life with the convenience and energy efficiency that denser settlements can provide."
Many cities reflect this trend, as downtowns all over the country are being gentrified by young people moving in, who want a more European-type lifestyle, with local shops, restaurants and coffee bars. This may be partly due to the fact that so many young people have traveled abroad. We like to imagine rows of windows, in offices and apartments, where our loyal readers and listeners have fired up there computers and clicked on our website. But they can't do it alone--we all need YOUR help! If you haven't subscribed yet, won't you consider doing so? It doesn't cost much: You can keep us going for less than a latte a WEEK. Yes, less than $12 gets you a 3-month subscription, and Anne Strieber has a NEW contactee interview for you this week! So please Subscribe today so we'll still be here tomorrow. Art credit: Dreamstime.com
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