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Be Patient With the Patient
Frank Anton / Frank Talk / April 2012
In 1982, with housing starts at 1 million units, housing seemed like it was on its deathbed. But a year later housing came back to life. Starts hit almost 1.7 million units. Today, I get the sense that many building product manufacturers are frustrated by the slow pace of this recovery, which, after almost three years, has only pushed starts up to about 700,000 units.
My suggestion: Get over it.
The meltdown in 1982, triggered by unemployment and astronomically high mortgage interest rates, was really a garden-variety housing recession. This time around, the still-sort-of-sick patient is trying to recover from persistent unemployment, 10 years of war, a housing price collapse, a foreclosure epidemic, unprecedented overbuilding, the freeze- up the financial system, tepid consumer confidence, political gridlock, and the possible economic demise of Europe. A patient this sick can’t possibly be expected to get better overnight.
Now, an economist at Trulia, a real estate website, has developed something called the Housing Barometer, an index meant to measure the well-being of the housing industry. It factors in housing starts, existing home sales, and delinquency plus foreclosure rates. At this point housing starts are up 22 percent from their bottom in 2009; existing home sales have improved 47 percent from their low in 2008; and the combined rate for delinquencies and foreclosures has declined by 32 percent since its peak in 2010. Average those percentages, and the barometer stands at plus 34, which, according to the economist, means the housing market is one-third of the way back to normal.
I don’t know if you think that’s good news or bad news. But a year ago the barometer stood at 16, which, to me, means the patient is still weak but getting better, albeit slowly. And that’s good news.
P.S. If you send me an email, I’ll send you a list, developed by Hanley Wood Market Intelligence, of the 50 healthiest housing markets, some of which are already in very good shape.
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