New Report: The Shifting Nature of Housing Demand.

Report, from Demand Institute, is HERE. Key projections:

This will be a two-stage recovery. Seasonally adjusted average house prices will increase by up to 1 percent in the second half of 2012, rising to an annual rate of increase of 2.5 percent by 2014.Between 2015 and 2017, they will rise by 3 to 3.5 percent a year on average.

The recovery will be led by demand from buyers for rental properties, rather than, as in previous cycles, demand from buyers acquiring properties for themselves. More than 50 percent of those planning to move in the next two years say they intend to rent. Young people—who were particularly hard hit by the recession—and immigrants will lead the demand for rental properties.Developers and investors will fulfill it, developers by building multifamily homes for rent (that is, buildings containing two or more units, such as apartment blocks or townhouses), and investors by buying foreclosed single-family properties for the same purpose.

Rental demand will help to clear the huge oversupply of existing homes for sale. In 2011, some 14 percent of all housing units were vacant, while almost 13 percent of mortgages were in foreclosure or delinquent—increases of 12 and 129 percent respectively over 2005 levels. It will take two to three years for this oversupply to be cleared, and at that point home ownership rates will rise and return to historical levels. More than 70 percent of those planning to move three to five years from now say they intend to purchase their home.

The housing market recovery will not be uniform across the country. Some states will see annual price gains of 5 percent or more. Others will not recover for many years. The deciding factors will include the level of foreclosed inventory and rates of unemployment. There will also be vast differences within states. Here, additional factors count, such as whether local amenities, including access to public transport, are within walking distance of homes. By examining seven factors that influence house prices at a local level, the report identifies four categories of cities and towns in which prices will behave differently (population share in parentheses):
• Resilient Walkables (~15%)
• Slow and Steady (~35%)
• Damaged but Hopeful (~30%)
• Weighed Down (~20%)
We predict that each category will demonstrate a distinct pace and strength of price recovery.

Originally created and posted on the Oregon Housing Blog.