Every penny reduction in the price of gasoline leads to Americans having $1.45 billion of disposable income in their pockets.

If the Federal Reserve Bank increases interest rates, the effect on the housing mortgage market will be negligible.

Millennials will buy homes, but they’ll take their time; student debt will affect their buying.

Those were three of dozens of messages delivered by Jonathan Woloshin, executive director and co-head of fundamental research and chief investment officer of wealth management research for UBS Financial Services.

Woloshin traveled to Colorado Springs recently to give Realtors, mortgage lenders, builders and others in the industry an economic update about the housing industry. And it was that last point that resonated the most.

“Markers still point to a generally pretty-healthy market,” he said. “Looking at the economic backdrop, the population dynamics, wage growth, I think it shows a pretty good story for housing,” in Colorado Springs.

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The future belongs to the Millennials.

Millennials

“Really, the crux of a lot of things, whatever business you’re in, you need to be thinking about Millennials. Millennials are a very, very unique group of people,” Woloshin said.

There’s a lot of talk about Baby Boomers aging, he said, but what should be considered is the large mass of young people making their way into the economy.

Compared with 46 million Boomers reaching 65 and older, there are 87 million people in the 15-34 age bracket and another 61 million now age 15 and younger, he said.

Millennials are less apt to buy a house, according to the research.

“It’s our fault. We gave them money and said — housing is the American dream,” Woloshin said.

During the peak of the housing bubble, people younger than 35 were regarded as the “single-largest buyers of homes.”

After the bubble burst, home values declined $7 trillion nationally, he said.

Now, only 34.6 percent of people age 35 and younger own homes, compared with more than 70 percent of people older than 45, and 58.4 percent of those from 35-44 years old.

“Whatever business you’re in, you need to be thinking about Millennials.” 

– Jonathan Woloshin

The older people get, the more likely they are to be employed, Woloshin said, citing data from the Bureau of Labor Statistics.

The rate of unemployment for 20- to 24-year-olds is less than 10 percent; that compares with less than 6 percent for people from 35-39 years old.

Student debt

But more than just the housing bubble and resulting recession is keeping Millennials from buying homes. Many are carrying student loan debt. In 2014, total student debt had grown to more than $1.2 trillion nationally, an increase of 357 percent since 2003, he said, citing figures from the Federal Reserve Bank of New York.

The number of young people with student debt continues to increase, he said.

In 2003, 20 percent of 25-year-olds carried student debt; that compares with 43 percent of people of the same age in 2013.

At the end of 2014, figures from John Burns Consulting showed that student debt forced an 8 percent drop in home sales, causing the real estate market to lose $83 million in potential sales.

The real estate consulting firm also says that every $250 per month in student loan debt reduces purchasing power by $44,000.

The amount of student loan debt is keeping  Millennials from purchasing homes now — a trend that could continue in the future.

Skilled labor

But that isn’t the only problem the housing market is facing.

During the housing downturn in 2008-2009, many construction company employees left the housing sector to work in the oil fields, Woloshin said.

And that’s going to affect the price of housing in the future — as Millennials start to consider buying houses. There could be less skilled labor to keep up with demand, he said.

“There’s consternation that the industry wouldn’t come back,” Woloshin said.

“We’re sitting here with a lack of skill set for really highly skilled labor, whether it’s electrical, plumbing, framing, roofing.

“I have not seen a real answer,” Woloshin said.

Still, there is good news. Lower interest rates will keep housing more affordable — and even with a rate increase on the horizon, it will take an increase of  at least 2 pecentage points before the housing market starts to slow down, Woloshin said.