Lumpy, choppy, and iffy goes the recovery.
And those three characteristics affect its slope--which is ever-so-gradual--but not the fact that it is, after all, recovery.
Top of mind for most builders, large, small, medium, and tiny, are three constant needs--each of which have been thrown into imbalance and scarcity in the long wake of the disaster that was last decade: lots, labor, and lending.
Consider each as a kind of valve that, in its way, opens or restricts the the flow of housing's recovery, either on the supply side or the demand side of the equilibrium.
Lots and labor are valves that have closed to a particularly tightly constricted mode post-Recession, affecting supply so significantly that price bubbles have clustered up in spotty markets--like the Bay Area and Denver, and the Northwest, where jobs-to-permits levels are way out of whack.
Lending--both to builders and developers for land acquisition and development and to prospective home buyers--is a valve that has up to now, and still to a significant degree is a constricted one. A FICO credit rating of 700 has been a norm historically that indicated a safe and solid home mortgage loan, and today's median credit ratings of 750 mean, apart from other hurdles that come in a post QM world of lending standards, that this valve is far from the setting it needs to be to "level-set" demand flow.
What's coming relatively clear is this: adversity has not gone away, but it's now taken a different--and much preferred--shape and force.
In other words, look at CoreLogic chief economist Frank Nothaft's comments yesterday on one of housing's inarguable bright spots, household formations.
With all those jobs that have been added to payrolls over the past four years--6.8 million private sector, and 118,000 public sector--household formations are accelerating.
Young workers, who took a particularly hard hit as the Great Recession steam-rolled the economy, are still making their way out of the hole the downturn created in their career paths, but now it seems they've gained purchase on earnings, and can set about starting homes, families, and household that become two-thirds of the GDP juggernaut.
So, now, as household formations start to respond in correlation to job formation, job security, and eventually, wage power, housing starts to look better and better, both on the multifamily side and the single-family for-sale side of things.
The valves of lot development--thanks to an increased flow of capital--and lending, thanks to banks and non-bank lenders needing to make money for their respective stakeholders have begun, ever so slowly, to show signs of loosening their tight grip.
On the other hand, the valve of labor--which shows up as a crisis in markets like Dallas, Denver, and Phoenix--doesn't look as if it's easing up one bit. Some would say it's getting tighter. Some would say that one of the only foreseeable solutions is tied to immigration reform.
'Tis the season to complete homes as fast, and as well, and as profitably, as possible to keep this lumpy, choppy, and iffy recovery motoring along. Better and better times are around the next corner.