This won’t make you feel better about the housing recovery
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This week’s headlines from the home building industry won’t make you feel better about an economic recovery.
Not only did new home construction fall 16 percent in January, but confidence levels among home builders took a big hit, too. Experts say to keep in mind these are only monthly numbers, and the frigid winter is a factor. However, they also say there is still concern about the housing market’s long term prospects.
Big picture: The U.S. housing market is recovering, but that recovery is weakening. The CEO of Pulte Homes, one of the country’s largest home builders, foresees a “sustained multi-year recovery.” (CEO-speak for “not too hot, not too cold?”) Jed Kolko, chief economist at Trulia, says home builders are reticent, and not only because there are still a lot of vacant homes in overbuilt markets like Las Vegas and Florida.
“Coming out of this recession, fewer people have saved enough for a down payment,” Kolko says. “It’s also very difficult for many people still to qualify for a mortgage.”
Lending standards are still tight, despite recent reports that Wells Fargo is flirting with subprime lending again. (The industry prefers the term “alternative” lending.) Aside from that, new mortgage-lending rules aimed at preventing another housing crash come with added fees, according to Joe Ventrone, vice president of regulatory affairs and real estate services at the National Association of Realtors.
“That is another reason why the cost of getting credit is higher, and they’re only going to give credit to those pristine buyers,” Ventrone says.
And that supply of pristine buyers depends a lot on good jobs, according to Wharton real estate professor Susan Wachter.
“Good jobs, of course, allow people to establish their housing and become first-time homeowners,” she says.
But until those first-time buyers are ready and able, don’t expect a raucous chorus of bulldozers clearing the way for new homes.
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