After the Crash: How Will People Live and Spend in the New Economy?

Kathleen Madigan takes a look at new research that considers the shift in America's living situations, and what it means for consumer behavior.
May 20, 2012, 5am PDT | Ryan Lue
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With the recent collapse of the housing market on one hand and an ever-tighter rental market on the other, Americans are finding it increasingly difficult to keep a roof over their heads. Even so (or is it accordingly?), the majority of Americans still aspire to own their own home, according to a recent study by the Demand Institute, an arm of the U.S. Conference Board.

Entitled "The Shifting Nature of U.S. Housing Demand," the report suggests that the housing sector is ready to turn around – but that it won't be back to business as usual, even after prices pick back up.

"The first stage of this recovery will be led by rental properties," Madigan explains. "Past homeowners who lost their houses to foreclosure, young adults who are now living at home or who haven't saved a down payment, and new immigrants will drive the demand to lease rather than to buy."

"Homeownership isn't dead, however, argued Louise Keely, chief research officer at the Institute and one of the study's authors. It will simply be delayed, because consumers are still repairing their finances, and reconfigured, because big is no longer better in housing."

What's more, tenants and prospective homeowners are beginning to realize they can't afford to occupy such large spaces, even in the suburbs, where lower prices are offset by the cost of driving long distances. Smaller homes mean new spending habits, as consumers realize they don't have the room for a home gym or a storage room, and turn to businesses to fill the gap. "Almost every consumer-facing industry will feel this effect as consumers adapt," the report argued.

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Published on Tuesday, May 15, 2012 in The Wall Street Journal
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