PATCHWORK NATION -- April 28, 2010 at 10:51 AM ET
Patchwork Nation: The Housing Market and the 'Real' Recovery
Standing in the spring of 2010 looking around at the economy, we think it's worth asking: What does a recovery look like? There have been positive signs lately - the auto industry looks much better and consumer confidence numbers are up - but concerns remain.
The housing industry in particular still has a lot of ragged edges. Foreclosure data for March in our Patchwork Nation communities show reasons for pause - at least at the idea of full-blooming recovery.
Foreclosures were up in every one of our 12 county types in March compared with February - with the big-city "Industrial Metropolis" and formerly growing "Boom Town" counties leading the way. Those two county types, along with the wealthier suburban "Monied 'Burbs," have more than two foreclosures for every 1,000 homes with mortgages.
But go back and compare those figures with December 2009's and things look better. In nearly every county type, foreclosure numbers are down for March, in some cases sharply.
So what does that mean going forward? The next few months may be key to answering the question.
Just a part of the picture, but a big part
While there has been some minor good news in housing, such as home prices inching up, there is a legitimate question about how long this may continue. On Friday, April 30, the government tax incentive for home-buying ends. Until that actually happens, it's impossible to say for certain what it will mean.
If home-buying slows, foreclosures could begin climbing again over the longer term or at least stay flat. Many people are just hanging on, waiting for the economy to pick up.
And even with the relatively good news regarding foreclosures since December, those numbers reflect some trouble as well. The three wealthiest county types - the "Boom Towns," "Industrial Metros," and the "'Burbs" - are still experiencing the biggest foreclosure problems. That's no small thing.
There are a lot of facets to the U.S. economy - from consumer spending to employment rates to Wall Street and finance - but housing is a critical piece. For most Americans, it's their biggest investment, and for the first half of the last decade it financed a lot of consumer spending through equity loans.
For consumer spending - which makes up about two-thirds of the economy - to rebound, housing will have to come back, or at least stop being a drain, particularly in those three county types.
The "real" trend
Determining what the recovery looks like - strong, weak, or perhaps almost nonexistent - may depend on which of the two foreclosure trends is real.
Are the March numbers just a hiccup, a temporary increase, in the longer-term trend going back to December? Or have the past few months been an aberration, helped in part by the government home-buying program?
If the first scenario is correct, the economy could start to pick up relatively quickly. If it's the second scenario, the economy could drag along much longer - regardless of the improvement on Wall Street.
As we have traveled the country talking to people in our communities, there seems to be a definite point of view. The most common comment is they do not expect things to turn around quickly.
This entry is cross-posted from the Christian Science Monitor's Patchwork Nation site.