With unemployment high among young people, more are going back to school and deferring purchases of new homes, reportsReal Estate Economics.  The soft employment market certainly makes apparent the advantage of having a college degree, with a 4% unemployment rate among college graduates compared to 15% for those without a high school diploma. While this surge of people returning to school is creating a housing niche market in college towns, that is a discussion for another time.  More significant is the fact that it is likely the young people of Generation Y who will lead a housing market resurgence.  In the meantime, Gen Y is content to wait for a better economy before committing to buying a home.  For now their presence is being felt primarily in the rental sector.  Seventy five percent of Americans in their early to mid-20s are renters, and 15% of them have moved back home with parents.  In the short-term, this isn't helping the housing market.  However, as the economy begins to improve, the Gen Y fence sitters of today represent millions of future homebuyers. Affordable home prices and tax credits have helped stimulate demand among first-time buyers and the recent climb in mortgage rates above 5% has motivated some to hop off the fence, but down payment constraints are keeping many from attaining homeownership.  This is problematic, especially since strength in the rental market means that those who are renting are likely paying as much or more to rent, than they would to own. While theFederal Reservecontinues to support the availability of low-priced mortgages, these policies are not sustainable, so the government will abandon its support of homeownership.  This will be a foolish mistake on the part of the Central Committee presently running our government, but spending $100 billion to own Government Motors probably has them distracted.  Therefore, it is essential thatFannie MaeandFreddie Maccontinue to play an active role in mortgage markets.  As the economy begins to improve, and Gen Y jumps into home buying, mortgage money will become very expensive without Fannie and Freddie to help with availability and pricing.  Supply and demand suggests that it may become very expensive even with Fannie and Freddie playing an active role.  In the meantime, investment in housing is increasing dramatically.  This is driven by the pervasive belief that housing prices in most markets have hit rock-bottom, and the even more pervasive perception that home values have reached levels which are significantly below the fundamental value of the underlying assets.  When you see investors at auctions, buying foreclosed assets and converting them into rental stock, it is because they can rent those assets for more than it costs them to buy those assets.  And that is a sure sign that it is time to buy. The US economy will begin to pull out of the recession by the end of this year or early in 2010; even sooner in markets where unemployment is stabilizing, like Dallas, Fort Worth, Houston, Austin and San Antonio.  Coincidentally, in these Texas markets, there is already a seriously diminishing inventory of available new homes.  The other thing they all have in common, these five Texas cities were recently cited as the5 Best Housing Markets in the USby Builder Magazine and Hanley Wood Market Intelligence. Yes, sadly, it probably will take a decade for the housing market in South Florida to return to normalized levels.  But, here in the Dallas Fort Worth Metroplex, new home inventory has quietly fallen to its lowest level in years, now representing enough inventory to satisfy less than 6 months of demand at present levels. Those of you who are sitting on the fence should be somewhat concerned that there just may not be any inventory available to buy, if you wait until there is overwhelming evidence that the recession is behind us.  Sounds crazy, I know, but the facts are indisputable.  There just aren't many new homes in Dallas or Plano or Frisco available, and when they're gone, they're gone.  So, if you're waiting for a sure thing, you just may end up buying in South Florida. ...read more