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Housing market recovery is limping along

Mitchell Hartman Mar 17, 2015
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Housing market recovery is limping along

Mitchell Hartman Mar 17, 2015
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The Census Bureau and Department of Housing and Urban Development report on residential construction for February is out Tuesday.

Economists expect a moderate decline in housing starts from January, and a slight uptick in housing permits. In January, housing starts were up 18.7 percent from the previous year; permits were up 8.1 percent year-over-year.

Economist Patrick Newport at IHS Global Insight says the housing sector – both homebuilding and existing-home sales – is growing by approximately 5 percent on an annual basis at this point. To contribute meaningfully to the economic recovery, he says the sector would have to grow by at least 20 percent annually.

Instead, he says, “the market for single-family construction has hardly improved at all in the last 18 months.” Multifamily housing is doing much better, with many young people moving to hip urban centers on the coasts — like Seattle, Portland, San Francisco, New York and Washington, D.C. — and choosing to rent or buy small apartments. Luxury home-building is also doing better than the market for single-family starter- and move-up homes; people in upper wealth brackets have experienced more recovery in their assets since the recession ended than lower- and middle-income Americans.

These developments mirror the struggle of many mid-market homebuilders, and their construction workforce. Construction payrolls peaked in March 2007 at 7.7 million; the crash left only 5.4 million construction workers employed by January 2011, a 30 percent decline. Now, construction employment in the U.S. has recovered to 6.3 million—still nearly 20 percent below the peak.

Employment, Hours, and Earnings from the Current Employment Statistics survey within the construction sector. (National)

Employment, hours, and earnings in the construction sector, from the national Current Employment Statistics survey.

“The housing market started crashing about ten years ago, and we’re just barely a third of the way back, so we’re just improving at a snail’s pace,” says Newport.

The biggest challenge is demographic, says Daren Blomquist at RealtyTrac. “With the homeownership rate at historic lows, especially among the younger crowd, the first-time homebuyer is largely absent in this market,” he says.

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