ORLANDO – A new wind is blowing in the nation's housing market.
And if one of the industry's top economists is prescient, it's a wind that could begin to cool the red-hot real estate market in high-growth cities around the country.
Declines in home buyer traffic and changes in consumer attitudes about housing purchases are showing up after several years of positive growth, said Lawrence Yun, chief economist for the National Association of Realtors.
"One thing that is clear is there is much weaker momentum now compared to six months ago, one year ago or even 18 months ago," Yun told thousands of real estate agents meeting earlier this month in Florida. "We have had five years of a decent run. Is it due for a correction?"
So far, the association isn't backing away from its forecast of modest gains in U.S. home sales this year and in 2017.
But Yun sees indications of a moderation in housing demand and in consumer interest.
"The number of people saying it's a good time to buy a home is steadily declining," Yun said. "The number of people who say it is not a good time is beginning to rise, to a little more than 30 percent. There is a slight turn in consumer sentiment about buying, to less enthusiasm. Everything is now trending neutral."
Realtors around the country report that buyer traffic has leveled off in many markets after several years of steady gains.
"Compared to one year ago, it's almost the same. There are no meaningful increases," Yun said. "Buyer enthusiasm is least in areas with strongest price growth. Buyers are saying if prices rise too much, I am going to back off."
Yun said lender surveys show that fewer people are applying for loans to buy homes, even though interest rates have remained relatively low.
"It had been consistently positive up to the summer," he said. "Ever since the summer, it's beginning to trend down from one year ago."
The early signs of softening aren't enough for the 1 million-member Realtors association to revise its bullish outlook. The association expects about 5.4 million homes to trade in the U.S. this year and another 5.5 million in sales in 2017. That's up by more than 1 million annually from the worst of the recession but lags decade-ago peaks by more than 1.5 million transactions.
"Existing home sales should be closer to 6 million if not above," Yun said. "Given that pent-up demand, I think the next couple of years we should see a steady increase toward that figure."
Nationally, real estate agents are pinning lots of hope on the millennial generation of home buyers.
Yun said student debt levels are keeping many young home buyers on the sidelines.
"There has been a tripling of student debt in the last 10 years," he said. "Student loans equal a five-year delay in home purchasing."
He said the absence of younger home buyers has fueled the overall decline in ownership in America.
"The homeownership rate was at a 50-year low two weeks ago," Yun said. "The decline in homeownership at 65 and older has been minimal. The decline has been much sharper among the younger generation."
A growing wealth gap between younger and older households also has held down millennial homeownership, he said. But more adults will soon be in the 30 to 39 age range, which is the sweet spot for first time buyers.
