HOUSTON, Feb. 11, 2014 /PRNewswire/ -- While rising home prices are leaving older homeowners flush with increased equity so they can buy new or second homes — increasingly outright with cash — younger people are finding it more difficult to buy into the American dream of homeownership with price tags that outpace their income growth, according to the latest BBVA Compass research.
"For these prospective homebuyers, home prices have risen faster than their incomes during the recovery," BBVA Compass economist Jason Frederick wrote in his 2014 housing outlook. "Currently, home prices are now on the high end of a historical relationship between median home prices and median family income, and young families will need to see faster income growth and save additional money to make a larger down payment."
Frederick said that builders are increasingly targeting buyers age 55 and up because consumers in this demographic are more confident in the economy. That confidence comes from their increased home equity and net worth, Frederick writes, which is likely behind the growth in all-cash transactions. Around 42 percent of residential sales in December 2013 were all-cash transactions, up from 18 percent in December 2012.
"Older homeowners are increasingly able to purchase a new residence with cash only after they sell their current home," Frederick writes.Frederick was careful to point out that these demographic tensions will not derail the overall positive outlook for the housing market in 2014 as the economy slowly recovers:
- There will be 700,000-800,000 new foreclosures in 2014 compared to 1 million in 2013;
- About 1.1 new homes will be built this year, twice the pace of 2009;
- Home prices will increase at 8.5 percent this year, compared to 11.5 percent in 2013;
- Number of owner-occupied homes will increase in '14 for the first time in seven years.