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30 From authoring Genworth Mortgage Insurance's Weekly Economic Report to leading industry surveys for lenders, Tian Liu is responsible for tracking U.S. and regional economic trends. Liu began his economics career in the Australian Treasury Department in 1997 and started covering the U.S. housing market with Cemex in 2007, where he was the Director of Economics responsible for economics and housing market analysis. In 2011, he joined Owens Corning to lead its economics team. Liu joined Genworth Mortgage Insurance as its Chief Economist in 2014. He holds a master's in economics from the University of Chicago and an undergraduate degree in economics from the Australian National University. What are the factors impacting housing supply? Do you see this challenge continuing into 2019? Inventory shortage has been going on for many years and a couple of factors are responsible for it. First, there has been a very low level of construction so far that has recovered only moderately over the past few months. Secondly, we haven't seen that V-shaped recovery we saw in past cycles, resulting in a wide gap between demand and supply. On the demand side, we are currently seeing a very strong housing demand partly because of the macroeconomic picture such as strong job growth that's encouraging homebuy- ers to get back into the housing market. e millennial generation is also driving demand because they have reached an age where they are starting to have families. e third factor affecting inventory is the shortage of repeat buyers. If you look at the type of homebuyers, repeat buyers sell the unit they're living in to buy another one, creating a lower impact on inventory. On the other hand, a first-time homebuyer is moving out of their apartment or their parents' or friends' homes to start a new household. So the drain on inven- tory is bigger from a first-time homebuyer. As a result of all these factors, while inventory is improving slightly with the rise in construction, more first-time homebuyers com- ing into the market, we don't see a huge change in mitigating this challenge in 2019. How do current housing market trends compare to what we have seen historically regarding growth? e absence of a V-shaped acceleration in housing recovery is one of the main differences between this recovery cycle and the previous ones. We haven't seen a broad- based recovery across all housing price points either. It has been strongest at the higher end of the price point, but looking at the lower end, such as homes below $200,000, the market segment hasn't recovered as much. According to our First-time Homebuy- ers Report published in May, we're seeing a significant increase in first-time buyers over the last three years. Between 2014 and 2017, there has been a 40 percent increase in that market segment. At the same time, the repeat buyer segment has barely budged and is largely squeezed out of the market. erefore, as soon as we have adequate supply in the market, we could see a reacceleration from the repeat buyers because these homeowners have stayed in their homes for a long time. And their home equity has accumulated over the last few years. Historically, when people accumulate a lot of home equity, they tend to upgrade their housing. But in this cycle, because of lack of inventory and competition from first-time homebuyers, they haven't been able to do that. But we do see deceleration for the first-time homebuyers. is segment has seen such a tremendous growth in the last three years partly because of catch-up in the delayed household formation after the housing crisis. And partly because of demographics, such as the millennial homebuyers. "The absence of a V-shaped acceleration in housing recovery is one of the main differences between this recovery cycle and the previous ones. We haven't seen a broad-based recovery across all housing price points either." Tian Liu Chief Economist, Genworth Mortgage Insurance ASK THE ECONOMIST HEAR DIRECTLY FROM TODAY'S LEADING MARKET EXPERTS.

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