'Shadow' sales could revive housing

It's called "shadow demand," and experts think it could breathe life into the housing market in the United States.

But will it help in Wichita?

The recession drove many young adults to "pair up," said Stan Longhofer, director of Wichita State University's Center for Real Estate — move home with their parents or move in with friends. It was a way to save expenses as jobs and money disappeared in the global economic collapse.

As economic conditions improve, those young adults are expected to create their own new households, thus the shadow demand that experts think will revitalize housing starts nationwide.

But there's a difference of opinion whether those displaced young adults will be a tonic for Wichita's moribund housing market, with sales trending below the tax credit-fed numbers of 2010.

Brad Hunter, chief economist at Metrostudy, a Florida-based housing analyst, thinks the worst is over for housing starts.

Hunter thinks starts will rise slightly to 648,000 this year and near 900,000 in 2012, still well below the norms of 1.4 million.

"The main story about household formations and housing starts, that trend applies whether you're talking Kansas, Chicago, Florida or Arizona," he said.

"During the recession and even after, people doubled up and took on roommates. The picture of the 30-year-old in Mom and Dad's basement comes to mind."

It would be a welcome boost in Wichita, where the market is recovering slowly, according to Tessa Hultz, chief executive of the Wichita Area Association of Realtors.

She said new and existing home inventories are declining, with sales down 12 percent from March 2010 when the homebuyer tax credit incentive was influencing sales.

"Right now, we have an uptick in the number of homes that have contracts pending, which is a good sign for the market over the next couple of months," Hultz said.

"But it will take a few months of (sales) data to see if there is a trend above and beyond the seasonal fluctuations."

Longhofer thinks the shadow demand — which is anecdotal at this point absent 2010 census figures for Wichita — has to filter through the local rental market before it affects home sales.

"The first place we'll see improvement in terms of household formation in Wichita will be in terms of renting," he said.

"Rental units have done pretty well throughout the downturn. Even if we reduced the number of households, rental did OK. ... We're more likely to move from renter to homeowner than from living with someone else to homeowner."

Hunter, the Florida-based analyst, admits that Wichita's housing market depends on jobs, specifically growth in the aviation industry.

"Admittedly, aerospace and aviation have really taken it on the chin," he said. "Once job formation occurs, consumer confidence returns and allows more of the double-up crowd to create households and more demand for homes."

That will take time, Longhofer said.

"We could see an increase in new home starts this year, but we're starting from a very low number," he said. "I don't see a meaningful increase in new home construction this year, but if we have a good spring selling season, inventories will clear and people will feel better.

"Then, people could look at the Fall Parade of Homes as a positive time. I need to see the spring and summer selling results before I make that call."