Expect a new ‘normal’ for the housing market
TEXT OF STORY
Kai Ryssdal: We got some OK economic numbers this morning. Existing home sales were up, the third bump in the past four months. Third quarter gross domestic product grew at a clip of 2.6 percent, that’s an upward revision from earlier reports.
But here’s the thing. Both of those numbers were below expectations. Below what economists would like to see in what is, it has to be said, month 18 of the official recovery.
So we asked Marketplace’s Mitchell Hartman to adjust those expectations, to look at the housing market — often an indicator of how the economy as a whole will perform — to see how different things might look if the housing market were normal right now.
Mitchell Hartman: 2002 was considered a ‘normal’ year for housing — not too hot, not too cold. That year, homebuilders put up about 1.7 million homes.
Bernie Markstein: Right now we’re way below.
Bernie Markstein is chief economist at the National Association of Homebuilders and he says we’ll be lucky to break ground on 600,000 new homes this year. That’s just a third the level of homebuilding Markstein would consider healthy — enough new homes to keep up with normal population growth, not to mention meet all the pent-up demand from the recession.
Markstein: In past recoveries, it’s been housing that’s helped pull the economy out of recession. This time it’s the economy that has to help pull housing out of recession.
But that’s not too likely. Unemployment’s expected to remain high. And that’s partly because we’ve lost a million and a half construction jobs. Those won’t come back any time soon because we built way too many homes during the boom years and they still need to be sold off, says Anika Kahn at Wells Fargo Securities.
Anika Kahn: As the housing market corrects, it’s going to be an agonizingly slow recovery, well into 2014-2015.
And what might that look like to people in the housing market?
Carmen Ryan: I’m looking forward to a ‘new normal.’
Carmen Ryan is a broker in Portland, Ore.
Ryan: Housing prices keep track with the income level, because I think we got out of whack.
Ryan says no more double-digit price rises year-over-year, no more taking equity out of your home and living on debt. That’s what a healthy housing market will look like in years to come.
I’m Mitchell Hartman for Marketplace.
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