Household Formation: 2009 Housing Head Wind

A look at the forces that will be working against a housing recovery in the new year.

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With home prices having dropped a painful 21 percent from their 2006 peaks, property owners everywhere could use a splash of good news in their New Year's Eve cocktails. But as a nasty recession is now part of the picture, the chances of an aggressive housing market rebound next year are dim. "A lasting recovery in the housing market?" says Mike Larson, a real estate analyst at Weiss Research. "I don't see it in the cards until the back end of the year—if that."

Here's a look at the factors that will be weighing down the housing market in 2009:

6. Slowing Household Formation At the same time, the pace of new household formation is slowing, which further chips away at housing demand. Richard Moody, chief economist at Mission Residential, says the development is linked to three factors: More singles are moving in with each other, young adults are returning to live with their parents, and fewer immigrants are entering the country. "For those three reasons, you are seeing a slowdown in the rate of household formation," Moody says. "And to the extent that the economy and the labor market remain weak this year—which I think they will—then that's going to continue."

The List

Consumer Confidence
The Underwater Effect
Tighter Credit
Household Formation
Radioactive Effect
Foreclosure Sales
Subprime Mortgages