Echo boomers will lead us out of the housing bust, but when?

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Housing's best chance of a recovery will be the echo boomers, children of the WWII baby boomers, according to a Harvard University study. The big question is how long will it take for them to have the income stability to help us out of this mess?

With unemployment at its highest rate in almost 26 years, record foreclosures and frozen credit markets, there's not much light at the end of the tunnel. Echo boomers are that light. That generation is now in its peak home-buying and renting years -- between the ages of 25 and 44. Echo boomers even number 5 million more people than the infamous baby boomer generation.

"Echo boomers are larger than the baby boomer population. Couple that with immigration and you have the seeds, the possibility of a housing recovery," Nicolas Retsinas, director of Harvard's Joint Center for Housing Studies, told Reuters. The group will increase demand for the next 10 years and beyond, eventually offering support for the housing market.

But the current rate of unemployment, continuing drop in housing values and stagnating wages are all forces limiting echo boomers from buying homes. Real median household incomes in all age groups under 55 have not risen since 2000, according to the Harvard study. In fact, for the first time in 40 years, the median household income may be lower at the end of the decade than it was when the decade started. The severity of the recession could hold income down for years.

"The reality is that it's not just the cost of a house, but it's how much you make," Retsinas told Reuters and added, "Of course as people struggle with their jobs, as they lose that second job, they lose that overtime, their income drops make it more difficult to pay."

Yet, there is a silver lining. Echo boomers will eventually expand the number of needed housing units. But the problem is that they will probably enter the housing market with lower real incomes than people the same age did a decade ago.

Home sales have started to pick up thanks to the $8,000 first time buyer home credit and demand for foreclosure properties at bargain basement prices. We won't see much improvement in the market until foreclosures stop and the backlog of foreclosure homes are sold.

We also need to see private investors back in the mortgage marketplace to help free up new sources of credit. Right now 85 percent of all mortgage loans are created through a government program.

Are you an echo boomer? Are you in the market for a house?

Lita Epstein has written more than 25 books including The 250 Questions You Should Ask About Buying Foreclosures and The Complete Idiot's Guide to Improving Your Credit Score.

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