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Did the housing crisis create a lost generation of home buyers?

One of the apparent byproducts of the housing market crash may be a lost generation of homeowners, according to some housing market watchers. The nation's economic woes and the foreclosure crisis have pushed home values down drastically. An important component of the housing market is first-time home buyers. However, some economists say that many young Americans are choosing to rent instead of purchasing new homes, due to uncertainty in the marketplace.

A story in Bloomberg Businessweek recently recounted the tale of a doctor who is working through his three-year residency at Wexner Medical Center at Ohio State University. The resident had originally planned to buy a small condo during his residency in the hopes of putting a roof over his head in the short term, and the hopes of making a small profit upon selling the condo after completing his residency program.

Then he looked into the market price of the condo, which had been sitting on the market for two years at $50,000 below its last sale price just five years ago. Uncertainty in the housing market gave the resident pause, and he decided against the short-term home purchase plan.

An economist from Yale University has made public comments to media outlets recently that suggest there could be a lost generation of homeowners. The economist suggests that home values could remain low for years to come.

Cincinnati bankruptcy lawyers know that many homeowners in Ohio have fallen underwater on their mortgages-owing more on the note than the current housing market will bring in if the home is sold. The Yale economist says that the housing market, especially in the suburbs could be adversely affected for a generation.

Other economists disagree. Some economists point to the cost of student loans and the tough job market as the biggest drags holding down recovery in the housing market. Those economists say that Millennials-those in the age group between 25 and 24-years of age--are only delaying home purchases until the job market improves, bringing up wages. That age group is faced with 8.2 percent unemployment, higher student loan debts than previous generations and low wages in the tough job market.

Housing accounts for about 18 percent of the nation's gross domestic product. First-time homebuyers are an important aspect of the overall housing market. A recent Harvard study says that had household formation held steady throughout the Great Recession at pre-recession levels, there would be 1.3 million more households, which obviously would significantly reduce the supply of available homes on the market.

Source: Bloomberg Businessweek, "'Lost Generation' of Homeowners May Just Be on Hold," Meghan Walsh, July 16, 2012

http://www.businessweek.com/articles/2012-07-16/lost-generation-of-homeowners-may-just-be-on-hold#r=read

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