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Where To Find Housing Demand

Given record low interest rates and still-falling home prices, you would think housing demand would be surging, but these are strange, strange times. Difficult credit conditions, combined with a steep drop in consumer confidence have cancelled out housing's positives. Most concerning is a generational shift in housing demand.

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CNBC.com

While the overall home ownership rate fell a little more than one percentage point over the last decade, the numbers were much worse for younger Americans.

"Particularly hard hit were households headed by those age 25 to 54, who experienced homeownership rate declines ranging from 3.5 to 3.9 percentage points," according to a Fannie Mae analysis of new Census data.

The change in home ownership has been geographically widespread.

As home prices seem to be taking a turn for the worse again now, potentially a triple dip, consumer confidence in housing has fallen right in line.

Fannie Mae's September housing survey, "showed a marked deterioration in consumer expectations of home prices over the next year—their weakest outlook since monthly tracking began in June 2010,” said Doug Duncan, vice president and chief economist of Fannie Mae.

This even as negative headlines over the potential U.S. debt crisis abated in September. Oddly, this pessimism came at the same time that the share of consumers expecting mortgage rates to go up dropped sharply to the lowest level recorded. That is further evidence that even record-low mortgage rates are having a minimal effect on any housing recovery.

If housing demand cannot be spurred by low interest rates, low prices or even a slightly brighter economic picture, then where can we find it? For now, it's with investors.

Investors do not rely on credit as much as the general population and the potential revenue stream from increased rental demand can overcome fears of any further declines in home values.

As leaders in the industry and government mull potential new housing incentives and fixes, they should focus more on investors. With little newly- built rental inventory coming to market and still-surging rental demand, investors can help on many levels, sopping up distressed supply and providing more housing to limit the surge in rent rates.

Questions? Comments? RealtyCheck@cnbc.comAnd follow me on Twitter @Diana_Olick