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Fears of Stalling Housing Recovery Are Overblown
Nick Timiraos / The Wall Street Journal / October 1, 2013
Fear that the housing market’s recovery is stalling has been overdone, say economists at Goldman Sachs in a new report.
The paper — entitled “Where is the pent-up housing demand?” — suggests that housing demand among the young has been suppressed due to cyclical issues not structural ones.
Homeownership hasn’t fallen out of favor and student-debt levels aren’t the main culprits for lower housing demand among young buyers, write economists Hui Shan and Eli Hackel. Instead, they suggest that the economic downturn is most responsible for muted homeownership gains among younger households, and that the “pent-up” housing demand will improve in step with economic gains.
The bear case on housing goes something like this: the current “recovery” has been driven to an unhealthy degree by low interest rates and investor purchases of homes, particularly by large institutions. Meanwhile, traditional owner-occupant buyers can’t qualify for loans, due to some combination of having too much debt (especially student loans for younger buyers), stagnant incomes and tight credit standards.