Positive Signs in the Housing Market? Tamp Down That Excitement
Measuring the health of the U.S. economy continues to be a dodgy game. Witness last week’s job numbers that were nowhere as good as many had hoped. But a more complicated measure of improvement may be the U.S. housing market.
There was good news last week as newly released April numbers showed home construction had grown by 4.4 percent in that month. But immediately analysts raised questions. They wondered whether the bump was unsustainable because it was aided by the federal government’s home-buyer tax credit, which expired at the end of April.
And that’s only one problem. Looked at through Patchwork Nation, there may be a bigger cause for concern in the climbing housing numbers – where the biggest improvements in the construction numbers are occurring.
Through April there had been about 107,000 new single-family housing units started in the United States, according to the U.S. Census Bureau. And more than 40 percent of them were located in the what Patchwork Nation calls Boom Town counties, places that grew rapidly in the first half of the last decade – and then got slammed by foreclosures and falling housing prices.
Is the building there a good thing for those places – a sign of a turnaround – or a bad thing? That question has ramifications for the entire country.
Places Built on Building
It’s hard to overemphasize the impact the housing market and home construction have on the broader economy. Construction, especially home construction, provides good jobs and has a big multiplier effect in areas like furniture, HVAC and home electronics.
For the nation’s Boom Town counties those effects were magnified. The home rush of early 2000s added a lot of new addresses to those places, which often have a more exurban feel, and they added a lot of wealth. People who did carpentry and landscaping suddenly found themselves able to buy new and bigger homes.
And then the market crashed and left those people with mortgages they couldn’t afford and homes that had lost a lot of value.
As the NewsHour noted in its trip to Eagle, Colo., last year, a Boom Town west of Vail, the entire city was struggling through a hard time. And now, a year later, values are still lower, about 25 percent down from last year, according to Trulia.com.
And Eagle is not alone. In Las Vegas, Nev., another Boom Town, there are still 36,000 foreclosures and median sale price is less than half what it was in 2007. In Riverside, Calif., a smaller Boom Town, there are 4,600 foreclosures and the median sales price is also half what it was at the peak.
Those two places, among the hardest hit in the housing crash, are also seeing a resurgence in single-family home building. Clark County, Nev., (home of Las Vegas) has seen more than 2,000 new single-family homes started since January. Riverside County in California has seen 1,368.
On the whole, there have been 45,000 new single-family homes started in Boom Town counties in 2010. That is by far the most of any county type in Patchwork Nation. And that is despite the fact that the Boom Towns have one of the highest foreclosures rates of any of our 12 community types – at more than two per 1,000 homes.
Is that optimism or foolishness?
Starting up Again?
For all the talk of Americans reexamining their lives or changing how they live, the new building starts suggest something else may be going on – a hope to restart the housing machine. As the New York Times noted in a recent piece, the boom has already begun anew in Las Vegas.
And while the Boom Towns have had the largest number of new housing starts, the wealthy Monied Burb counties, which also have higher foreclosure rates, have also seen a mini-boom – 24,000 new single-family homes started since January.
It seems developers in hard hit areas are looking at the numbers and deciding to take a gamble on home demand coming back strong – and soon. If they are right, maybe a return to a scaled-down version of the good old days is coming.
But last week’s hiring numbers last week and the recent shakiness in the European economies, offer big notes of caution. And if the gamble is wrong all those new housing starts may simply add to the inventory of empty structures in those places, extending a weak housing market in places already suffering.
Kip Ward, who owns the Historic Anchor Inn in Lincoln City, Ore., says his town, classified as a Service Worker Center in Patchwork Nation, has also been struggling with foreclosures. He told us last week his son had just bought a foreclosed home in town from the bank for half what it was listed at on the market.
“The thing is they are a building a brand new home just down the street from the foreclosure he bought,” he said. “It’s going to go for a lot more money. I just wonder, who is going to buy it?”