RealTrends has been tracking data related to housing since 1979. Households, new and existing home sales, prices, mortgage rates and annual changes in Gross Domestic Product (GDP), among other data on housing sales.
One piece of data that continues to catch our attention is the percentage of all households that purchase a home each year. One data point of this is the 42-year average, which is 4.80%, and another is the median over that period of time, which is 4.67%.
That fact these two very different measurements are so close together leads us to conclude that this is a useful barometer of the housing market.
For instance, in 2005, the height of the previous housing frenzy, this rate was 7.36%. Obviously, something was way out of kilter — as we discovered when this rate fell to a low of 3.84% by 2010.
Most don’t remember, but the housing market fell steadily far past the general economic recovery which shows up in 2009 with growth in the GDP.
The recovery in housing sales proceeded from 2012 (rate of 4.17%) to 2021 where the rate was 5.30%. That is about a 27% improvement over 10 years – slow but steady.
For 2022, the rate was 4.32%, or a decline of about 18.5%.
Forecasting households purchasing a home in 2023
There are various forecasts for 2023 which range from 5.1 million to 5.4 million new and existing homes sales. If we reach the midpoint of those, 5.25 million total sales, then we would be at rate of 3.9% to 4.0% of all households purchasing a home this year.
Clearly, we have some room to grow to get back to the median or average of the last 42 years. A move back to the median would be equal to an additional 625,000 new and existing home sales. This would take us back to approximately 6 million total unit sales, still short of the 6.8 million to 6.9 million the industry did in 2021.
There is still abundant demand
From roughly 2010 until 2021, the number of new households formed in the U.S. exceeded the number of new single family and multi-family housing units between 4 million and 4.5 million by most estimates. And the homebuilding industry is challenged to make up for that difference.
Secondly, it seems apparent that with the homeownership rate of 65.9% or so, these factors seem to indicate that the frequency, or velocity, of housing turnover has slowed substantially. Simply put, more and more families are staying put. This is also reflected in the low inventory numbers of houses available for sale.
Do not bet on a quick recovery. It will be a slow climb back to the median and to bet otherwise courts disaster for any brokerage firm.
Steve Murray is a senior advisor for RealTrends and a partner with RTC Consulting.
This column does not necessarily reflect the opinion of RealTrends’ editorial department and its owners.
To contact the author of this story:
Steve Murray at smurray@realtrends.com
To contact the editor responsible for this story:
Tracey Velt at tracey@hwmedia.com