Housing is on the economic stat agenda this week.
We get new-home starts and building permits on Wednesday. That’s a good indicator of where homebuilding and new-home sales are heading. Then on Thursday, existing-home sales are reported. That’s a barometer of how much consumers are starting to jump back into the market to buy a first-home or trade up, or move to a place where the sun shines a little brighter and there are more jobs.
To see how things are going on the ground, this reporter dropped in to see a model home in the Harris Ranch subdivision of Boise, Idaho, about five miles from downtown.
Salesman Travis Hunter of Boise Hunter Homes was showing a $299,000 two-story home in a fresh-platted section of the development that was just weeds and lonely streetlights for years after the housing bust of 2006-07.
“Downstairs in this house is the formal dining room,” Hunter crowed. “Appliances in the kitchen are all stainless steel, they come with hickory cabinets. . . .”
Other selling points included a two-head walk-in shower, master-bedroom suite with a huge closet for the woman of the house, and hardwood floors.
Hunter says he’s selling one of these homes every week or so now, and more are being built on adjacent streets by his firm and several other local homebuilders. The construction site is swarming with subcontractors: Roofers, floor-installers, and debris-haulers — few of whom were able to land steady construction work as little as one year ago.
Economist Yelena Shulyatyeva at BNP Paribas in New York says the moderate upturn in housing is adding as much as 0.5 percent to annual GDP at this stage in the economic recovery.
“The housing sector was a bright spot last year,” she says, “and we will see housing starts grow this year,” says Shulyatyeva.
Shulyatyeva and other economists predict housing starts dipped in January. But that’s largely payback for a surge in home-starts in December, which was unseasonably warm, causing homebuilders to jump the gun and break ground early. She predicts new-home starts and building permits will rebound to a steadier pace of growth by mid-spring.
And, she says, multi-family apartment construction will continue to be stronger than single-family homebuilding this year. That’s because, with credit standards still tight, potential first-time homebuyers are excluded from the market or find it too difficult to navigate. Shulyatyeva says some continue to hesitate to invest in real estate — even as prices begin to rise and interest rates remain low — because they want to have the flexibility to move cities for new jobs.
But there are still a lot of cheap foreclosed homes for sale — and more dribbling on to the market every day. This constitutes a considerable ‘shadow-inventory’ of existing homes for sale. So why build so many new ones?
“While there are many buyers — often investors — at the low-end of the market looking at foreclosures,” explains Nicolas Retsinas at the Harvard Business School, “for people in the middle of that market, and those in the upper middle of the market, buying a foreclosed property is still a stigma.”
It can also be considerably more confusing than buying a new home, or an existing home with a clean paper trail. Dealing with banks, courts, and ‘as-is’ sale conditions can be daunting, especially for first-time home-buyers.