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Is the Housing Recovery Real?
Jonathan Smoke / Hanley Wood / June 20, 2013
Hanley Wood’s chief economist, Jonathan Smoke takes a look at the numbers and the state of the housing market.
When looking for evidence that the housing market is recovering, some big numbers on key conditions make a compelling case:
- New home starts for Metrostudy survey markets are up substantially at a 40% increase over starts from the same period last year. California leads in growth with huge gains up and down the coast, but we’re also seeing significant recovery in markets like Sarasota and Las Vegas.
- Residential construction spending is up correspondingly with the increase in starts at an annual rate of over $308 billion, an 18% jump from the prior year.
- Construction unemployment is down significantly, with a 43% drop from the 2010 peak and 9% year-over-year decrease, as construction now is helping to lift the economy.
- Home sales are up to the strongest levels since early stages of the downturn, with the annual rate of all single family home sales now over 5 million.
- Following the increase in sales, single family supply is at historic lows with only 4.1 months’ supply for new homes and 5.2 months’ supply for existing homes, representing 16% and 19% decreases respectively for the same time last year.
- The distress pressure is way down, with the lowest REO overhang in six years and showing a 38% reduction just over last year.
- Home prices are responding to the reduced share of distressed sales with the median new home price again over $250,000 a 7.4% increase over prices in the prior year when looking at new home closings. Larger gains than the national increase are seen across the country with significant jumps for markets in Georgia, Colorado and Michigan.
- The rebounding pricing is helping to make consumers more confident, demonstrated with a surge of the Consumer Confidence Index to its highest in over five years at 76.2.
- Delinquencies have fallen off dramatically, with the serious delinquency rate for Fannie Mae at its lowest since January 2009 and for Freddie Mac at its lowest since June 2009. Fannie shows a 19.2% year-over-year decline which is a 48% decrease since the February 2010 peak, while Freddie shows a 17.1% decline which is a 31% decrease since the peak.
- Pent up demand is now translating into buyers getting off the fence, with 30% of home shoppers surveyed indicating they are tired of their current homes.
- New home demand for the future is tilting more toward higher income and older buyers, as credit and affordability concerns principally impact young and entry level buyers, which will drive current trends such as the pricing increase.
Taken individually, each of these indicators demonstrates the favorable current conditions and auspicious course of the housing market; when taken as a whole, they answer the question “Is the housing recovery real?” with a resounding “Yes!”