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Home for sale by MarkMoz12. Posted under Creative Commons 3.0.

June was another strong month for the housing market as new home sales hit a seasonally adjusted annual pace of 592,000. That rate was 20,000 higher than the previous month, continuing to push an improving housing market.

Pending home sales also did well in June. In the last five months the National Association of Realtors’ Pending Home Sales Index (PHSI) recorded four months of growth. The PHSI reached its highest levels in the past 12 months with a 111, and it was one percent above June 2015’s 109.9. However, the PHSI has yet to match the 115 achieved in April of last year. The index is an indicator of contract signings. A score of 100 is equal to the level of activity in 2001, the first year of the PHSI.

Although most analysts agree that the housing market continues to do well post-recession, home sales in the first four years of the 2000’s averaged 964,000.There are a few reasons the housing market isn’t hitting the levels it did in the early part of the century:

  • Millennials, those aged 26-35, are not jumping into the housing market at the levels of other age groups. A recent survey of non-homeowners found that 71 percent of responders who were paying their student loans on time believed their debt was keeping them from buying a home. Over half of the responders said it would be more than five years before they could purchase a home.
  • Adults age 18-34 are living with their parents at levels not seen since before World War II. An analysis by the Pew Research Center found that in 2014 32.1 percent of adults in that age range were still living at home with their parents, and a 2014 Wells Fargo Millennial Study found that 39 percent of respondents said they are overwhelmed by debt.
  • Debt, including student loans, isn’t the only hurdle for a housing market that is still recovering from the recent recession. There is also a labor problem, according to builders; in the last two years more than half of the surveyed builders reported a shortage of labor. A June survey showed 56 percent of builders reporting a shortage, up four percent from the previous year.
  • Young potential homebuyers also face a shortage of new homes, partially due to the labor problem. With new homes at a premium, prices are on the rise. For the 52nd month in a row median home prices increased from the year prior. The higher home prices combined with the rising debt levels are making it tough for younger adults to enter the housing market.

Do you see the housing market continuing to improve? Will young adults return to the market? Let us know your thoughts in the comments.