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Is housing really back?
Posted By Tom Jackson On November 30, 2012 @ 1:52 pm In Construction Blog | No Comments
Here’s a tip that can save you a lot of time. Whenever you see a report on TV or in your daily newspaper heralding the resurgence of the housing market…ignore it.
Various pundits have wrongly predicted housing’s return for four years now, and as of this writing, the media has run a month-long string of what looks to be good news stories about the housing market. So does a groundswell of positive news reports translate into real actionable movement in the housing market?
From the cynical point of view of a journalist who has watched three epochal housing busts and booms come and go I can only definitively say…maybe. Or at least I’m not as skeptical of the possibility of forward progress as I was in June.
One thing is for certain, month-to-month numbers, which is mostly what you get in the mass media, are meaningless. A rainy, late winter can depress housing starts 50 percent or more over several months. Natural disasters, tornadoes, hurricanes, floods and fires, can boost starts once the rebuilding gets underway.
The only way to accurately chart the numbers is to look at a lot of data points over a six- to 12-month span. And you have to look at housing in the context of the general economy and government policy as well
With that said, since it’s nearly December, lets take a look back at the good and bad news regarding housing over the last six months.
When you look at the positive news, it appears most of those trends are coming from narrowly-targeted statistics. The larger trends such as student loan debt or shadow inventory are macro-level problems. Factor in the fragile nature of the economic recovery, looming tax increases, health care and increasing regulatory burdens, it may be presumptuous to break out the champagne just yet.
The one good macro level statistic – 894,000 starts – certainly looks better than the 600,000 starts that last year were touted as the “new normal.” And another positive trend, not generally included in housing statistics, is the boom in domestic energy development . This has helped lower gasoline prices everywhere and boosted incomes and employment in some regions of the country.
But this year’s housing starts are still below the 1.2 to 1.5 million starts the industry says it needs to be healthy again. Note also that the housing starts number aggregates single family homes and multi-family (apartment) construction into one statistic, and multi-family starts are growing, whereas single family starts fell a bit this year. That would indicate that fewer young families have the wherewithal to buy a new home for the time being and that apartment rentals may be the dominant housing mode for some time to come.
The wildcard in all of this is the government. The feds have dozens of ways they can goose the market for political gain while simultaneously sledgehammering the industry with regulatory burdens that make homebuilding slower and costlier. And the full impact of Obamacare has yet to be absorbed by the economy. On balance, the net impact of government will probably hurt the market more than help it.
Bottom line: I think we might see around 900K starts next year, but single family starts will struggle and multi-family will continue to dominate. And I don’t think the market will break through that 1-million starts figure for several years to come.
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 builders broke ground on 894,000 homes: http://www.google.com/url?q=http%3A%2F%2Ffinance.yahoo.com%2Fnews%2Fus-home-starts-jump-fastest-pace-4-years-133959785--finance.html&sa=D&sntz=1&usg=AFQjCNHywOpPPXEsVufFelIQ1eQJM_Pl8Q
 entering their most promising household formation years: http://www.google.com/url?q=http%3A%2F%2Fwww.businessinsider.com%2Fmoodys-echo-boomers-to-reverse-declining-homeownership-2012-10&sa=D&sntz=1&usg=AFQjCNFmv8G-Q16cziIjWAmOCnP840cCaQ
 Freddie Mac boosted its outlook for housing in October: http://www.google.com/url?q=http%3A%2F%2Fwww.businessinsider.com%2Ffreddie-mac-qe3-is-working-were-boosting-our-housing-market-outlook-2012-10&sa=D&sntz=1&usg=AFQjCNE7W9eRxA3CXYq2InR_W5P3b2RHbg
 PulteGroup: http://www.google.com/url?q=http%3A%2F%2Fwww.businessinsider.com%2Fpultegroup-q3-2012-earnings-2012-10&sa=D&sntz=1&usg=AFQjCNF4Avz4MwQGUULPVw19COONk98G8A
 retailer posted 4.3 percent: http://www.google.com/url?q=http%3A%2F%2Fwww.reuters.com%2Farticle%2F2012%2F11%2F13%2Fus-homedepot-results-idUSBRE8AC0FF20121113&sa=D&sntz=1&usg=AFQjCNGWshJGd9Yp2dj309FX660icszQow
 Standard and Poor’s Case Shiller Index: http://www.google.com/url?q=http%3A%2F%2Fwww.bloomberg.com%2Fnews%2F2012-11-27%2Fconsumer-confidence-in-u-s-climbs-to-more-than-four-year-high.html&sa=D&sntz=1&usg=AFQjCNGldEJlhfNfk1T2I0ckp93eaieOuA
 the Federal Housing Administration is broke: http://www.google.com/url?q=http%3A%2F%2Fwww.washingtontimes.com%2Fnews%2F2012%2Fnov%2F20%2Fgovernment-keeps-meddling-in-the-housing-market%2F&sa=D&sntz=1&usg=AFQjCNGBLwNvSZUJ3o_komr6todc8S9h7A
 The average debt is $26,000 per student.: http://www.google.com/url?q=http%3A%2F%2Fwww.usatoday.com%2Fstory%2Fmoney%2Fpersonalfinance%2F2012%2F10%2F18%2Fstudent-debt-increases-again%2F1639907%2F&sa=D&sntz=1&usg=AFQjCNG2sBtFKOHII99YzDejwAm8CiLnXg
 A housing bear if there ever was one, Barry Ritholtz: http://www.google.com/url?q=http%3A%2F%2Fwww.ritholtz.com%2Fblog%2F2012%2F08%2Fghosts-haunting-the-zombified-us-housing-market%2F&sa=D&sntz=1&usg=AFQjCNE3phEPfrgWQQ5pGnek31y4V7O_FA
 boom in domestic energy development: http://www.google.com/url?q=http%3A%2F%2Fwww.usatoday.com%2Fstory%2Fnews%2Fnation%2F2012%2F11%2F26%2Fpersonal-income-2011-oil-gas-boom%2F1728123%2F&sa=D&sntz=1&usg=AFQjCNESzkPJSmjbyDI9A_P-F3fhrI4GYw
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