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Panic Threshold: 6 Reasons Housing Prices Aren't Rising

• BusinessInsider.com/
 
A big driver of the housing market is the creation of new households when young people go out on their own or through other vectors such as divorce. More young people are finding the working world increasingly hostile and are choosing to live with their parents in order to save money or to have an inexpensive base to search for a job. Even more people who might prefer to live alone are finding roommates or sleeping on couches. Now of course many young people aren't necessarily going to find their first job and then immediately buy a home, but they do represent future buyers. The longer household formation remains depressed, the longer it will be before demand begins to rise again for houses. Lower divorce rates also have an impact. It's unlikely that the recession created a lot more marital bliss. What is likely is that it has become financially very difficult for unhappy couples to split up. It may be impossible to sell the home, or one partner might not feel secure enough to venture out on his or her own. This might reverse quickly, but it is having a detrimental impact on demand at the moment. Outside of Americans creating new households, another potential demand from housing is from immigration. But this seems unlikely to play a meaningful role in the coming years. The political winds have shifted against any large increases to legal immigration and toward stepped-up border enforcement, and a poor economy has led to a decline in numbers of undocumented workers looking for housing. 3. Shadow Inventory According to seasonally adjusted data from the Census Bureau, there are six-and-a-half months' worth of housing inventory. This is an improvement from the more than 12 months' of supply during parts of 2009, but it is not telling the entire story. These statistics can only capture houses that are actually listed and miss the so-called shadow inventory. Shadow inventory includes houses that the owners want to sell but aren't even bothering putting on the market because they don't believe they can get the price they want. There are likely a large number of baby boomers looking to downsize and banks looking to unload foreclosed properties. As prices begin to rise, these sellers will flood the market with new supply, pushing prices back downward.

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