20150416-NATIXIS-United_States__The_demise_of_the_homeowner_12页_328kb

Summary of FLASH ECONOMICS ECONOMIC RESEARCH - April 16, 2015 - No. 312

Core Content

The document discusses the state of the U.S. housing market and its implications for homeownership, rental demand, and inflation dynamics as of April 2015. It highlights the slow recovery of the housing sector, the shift in demand towards the rental market, and the structural and cyclical factors influencing household formation and housing starts.

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Main Points

1. Housing Market Recovery

• The housing market has been sluggish since the end of the recession.
• The recovery is primarily expected to occur in the rental segment rather than the homeownership rate.
• Structural and cyclical factors are contributing to the slow pace of recovery.

2. Factors Influencing the Rental Market

• Financial Constraints: First-time homebuyers face challenges such as student debt and weak wage growth.
• Monetary Policy: Tightening monetary conditions and rising interest rates are dampening demand for homeownership.
• High New-Home Prices: The price-to-income ratio for new homes has returned to its pre-crisis peak, making them less affordable.
• Rental Demand: With limited ability to purchase homes, households are increasingly turning to rentals, which will likely increase demand and pressure on rents.

3. Implications for the Economy

• The homeownership rate is unlikely to rebound.
• The growth in household mortgage debt will be modest.
• The wealth effect from rising property prices will be less pronounced for lower-income households.
• Rental prices are expected to rise, contributing to inflation dynamics.

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Key Information

4. Market Normalisation

• The stock of existing homes for sale has returned to its historical average.
• The share of foreclosed properties in total sales has declined significantly.
• The normalization of the housing market has led to a shift in demand from existing to new homes.

5. Building Activity

• Housing starts have increased gradually, surpassing one million units in annualized terms by late 2014.
• A temporary dip in February 2015 may have been due to adverse weather conditions.
• Developers' confidence has returned to pre-crisis levels.

6. Structural Outlook for Household Formation

• The long-term structural level of household formation is estimated at 1.1–1.2 million units per year.
• This is driven by demographic trends, particularly the population growth of individuals aged 16–44.
• The structural level of housing starts is expected to rise to 1.3–1.4 million units in 2015 and 2016.

7. Cyclical Outlook

• The cyclical recovery in the labor market is expected to drive a temporary increase in household formation.
• This could lead to a "boomerang generation" forming new households.
• A decrease in family complexity (e.g., fewer multi-generational or shared households) is also expected to boost household formation.

8. Impact on Growth

• The housing market recovery, particularly in the rental segment, is expected to contribute 0.4 percentage points to GDP growth over the forecast horizon.
• This is due to the combination of structural and cyclical factors.

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Risks and Uncertainties

• Lending Conditions: Uncertainty remains about how lending conditions will evolve, with potential for easing beyond current expectations.
• Wage Growth: A stronger wage growth than projected could lead to a more pronounced rebound in homeownership.
• Structural Limitations: Wage growth is expected to remain limited due to the distortion of value added in favor of capital, which constrains long-term prospects for homeownership.

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Regulatory and Methodological Notes

• The document is a research publication and not a financial analysis.
• It is not intended for general distribution and is restricted to professionals and qualified investors.
• The information is based on public data and does not constitute an investment recommendation.
• No liability is accepted by Natixis for any use of the document or its contents.
• The document is subject to internal approval procedures and should not be used for trading decisions without further analysis.

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Conclusion

The U.S. housing market is expected to recover gradually, with the rental segment leading the way. The structural normalization of household formation and the cyclical improvement in the labor market are positive factors. However, financial constraints, high home prices, and regulatory factors will limit the recovery in homeownership. This shift will likely have a lasting impact on household wealth, mortgage debt, and inflation dynamics.