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Slow Going for Housing Starts

housingWe’ve read a few places today that although housing starts were lower than expected for November, a recovering economy and wage growth should provide construction with a fresh push in the months ahead. But our director of research and education, Rosalind Greenstein, isn’t sure that will be true across the nation.

According to the numbers released by the Commerce Department this morning, November saw a decline in housing starts of 1.6 percent. Current data suggest an annualized rate of about 1.03 million new housing units in this country, which Greenstein said is consistent with the slow and steady economic recovery.

Greenstein said some housing markets still have a sizable inventory of vacant houses. These tend to be the places were the recovery is the weakest, and where wage gains will be the softest, she said. So an uptick in housing construction will occur more quickly in some places than others, she said. Where wages rise, more people enter the housing market, and with the threat of rising interest rates, that may happen more quickly, she said. But since first-time homebuyers often opt for existing houses over new construction, these new homebuyers won’t have a direct impact on housing starts, she said.

“The economy is improving, the labor market is tightening, but it takes a while for a housing permit to turn to a housing start. So, the trends are there, but the impact is felt slowly,” she said.

The market for multi-family construction is rising through most of the country, with multi-family units accounting for 38 percent of all housing starts in November. However, that sector declined in the South, she said. There is a limit to land available for construction, which contributes to demand for multi-family housing, and after the foreclosure crisis, there is additional demand from renters, she said.

2 Comments Post a comment
  1. I think Ms. Greenstein has it about right. Too much legacy debt, still largely unaddressed by the policy makers, now about to enter the eighth year of housing finance problems, as well as too much student loan and other legacy debt, to enable housing to reach lift-off stage in most parts of the United States.

    The website of the Federal Reserve Bank of New York has a national housing price map showing price movements at the county level since 2007. The 2014 map is the best looking one so far, but it is still a poor map for this long after the trough of the housing recession was reached, largely due to legacy debt and its impact on credit scores.


    December 16, 2014
  2. Katy Delay #

    Interestingly enough, houses and apartments in my neighborhood of Los Angeles are back up to all-time highs. (Marina Del Rey/Venice/West Los Angeles)


    December 19, 2014

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