Sweet Orange

According to a report from the Urban Land Institute (ULI), when the economy picks up, the demand for housing will increase, However, this does not mean that ULI sees a return to “normal” for the U.S. housing market in the coming decade:

Workforce housing will remain a challenge. The age of suburbanization and growing homeownership is over. The outer suburbs will have the least expensive housing but the cost in time and money of long commutes will eliminate any savings. Many who live there will do so not by choice but by necessity.

An article in Time magazine gives another twist on what the new normal for housing will be:

“The housing that has been built doesn’t fit the market any longer,” says Berkus [Barry Berkus, president of B3 Architects]. Which is part of the reason that, even with so many existing homes sitting unsold, we keep building.–”Downsizing: Today’s Home Buyers Are Thinking Small,” Barbara Kiviat, Time

The ULI report goes on to say that four groups will have the most influence on the housing market in the coming decade. And the report states that the circumstances that these four groups will encounter will affect their buying power.

These four groups are as follows:

• Older Baby Boomers who will become seniors in unprecedented numbers
• Younger Baby Boomers many of whom will be unable to sell their current suburban homes to move to new jobs
• Generation Y who will be renting far longer than past generations
• Immigrants and their children who will want to move to the suburbs but may find them too expensive even after current drop in housing prices.

What do you think? Are we just in a down phase of a cyclical housing market? If so, when the upswing occurs, will it look like the traditional housing market of the last fifty years? And if not, what will the new normal be for the U.S. housing market? The ULI report and Time magazine article provide some thoughts on this.