By Marilyn Kennedy Melia
What's ahead for housing?
Metrics like the supply of homes listed for sale versus the average number of homes sold monthly in a particular market or the increases or decreases in selling prices in past months are commonly used to predict future price and sales activity.
But other statistics – not as obviously tied to housing – can provide insight into the housing outlook.
Consider, for instance, a recent Bankrate survey that found only 51 percent of Americans have more emergency savings than credit card debt, the lowest percentage since the financial site began tracking this issue in 2011.
Indeed, when the country fell into a deep recession several years ago, shaken Americans began reforming poor savings habits, but that newfound thrift has been slipping of late. A survey released earlier this year from the Consumer Federation of America and the American Savings Education Council found that 68 percent of Americans are spending less than they earn and saving the difference. While that may seem impressive, that's down from 73 percent in 2010.
Especially in the post-financial crisis era of stricter lending rules, too many bills and too little savings will disqualify mortgage applicants.
"There's no question that it's much harder to get a conventional mortgage with a down payment that's less than 5 percent [of the purchase price of the home]," says Barry Zigas, director of housing policy at CFA.
Saving money is a struggle for many, but research shows that setting a goal to build a down payment fund "facilitates savings, especially when one sets a dedicated account for it," says Meir Statman, a finance professor at the Leavey School of Business at Santa Clara University.
The U.S. Department of Housing and Urban Development lists non-profit counseling agencies on its Website, www.hud.gov, which help would-be homeowners set realistic saving plans, see more on this below, "Home-Made Financial Help".
Like a game of dominoes, the housing market is fueled from the bottom with first-time buyers purchasing from move-uppers, and so on.
Since the recession, the share of first-time buyers has been below its historic average of about 40 percent of all purchasers, according to statistics from the National Association of Realtors. In January of this year, for instance, first-time buyers accounted for 26 percent of all purchases.
Debt – both credit card and student loan – "appear to be contributing factors in suppressed entry-level activity, but it is difficult to discern to what extent," notes Walter Molony, an NAR spokesman.
As the economy improves, adding jobs and boosting incomes, first-time buyers should return, notes Celia Chen, a housing economist for Moody's Analytics.
But the reappearance of first-timers will be slow. "Young adults have had a hard time striking out on their own. Some 1.5 million millennials were unable to form their own households because of poor job opportunities," Chen says. "With late-starting careers, the path to homeownership will be slower than it was for their parents."
Just about everyone – including the professionals who counsel home buyers and homeowners in financial difficulty– think about savings and debt differently than they did before the recession, says Doug Robinson, a spokesperson for NeighborWorks America, a housing and community development organization.
"Two-thirds of the people who faced foreclosure didn't have any emergency savings," Robinson says. "It is clear that a lot of Americans have a tough time saving money, but particularly if you are a homeowner it is important to have some cushion. We really stress that it's important not to buy a home at the top of your budget."
Current homeowners who are baffled by budgeting can tap professional counselors, whose services are often free from HUD-approved agencies, Robinson adds.
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