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The housing recovery: waiting and wondering

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It’s not an original answer, but it’s one I’m comfortable giving whenever anyone asks about the economic recovery of the woodworking industry. “When the housing market improves, things will finally pick up,” I say and, before pressed for details, I exit stage left like a comedian who gets an unexpected big laugh. “Thanks. You’ve been wonderful. Try the veal and tip your waiter.”

But here’s the problem with my answer: the housing market isn’t cooperating.

“With millions of owners stuck in homes worth less than they owe on their mortgages, existing home sales remain depressed while new home sales continue near record lows,” begins “The State of the Nation’s Housing” report, released June 6 by the Joint Center for Housing Studies of Harvard University.

With little demand, the last three years have brought record-low construction levels, while the lingering consequences of the recession and financial crisis are thwarting a broader recovery, the report states.

“The state of the nation’s housing is sobering,” says Eric Belsky, the center’s managing director. “Total housing construction over the previous decade now barely exceeds the lowest level of any 10-year period in records dating back to 1974, but vacancies remain elevated because the recession has driven demand down so sharply.”

The report includes the following statements:

• “The construction downturn has swept across the entire housing sector. Single-family completions in 2010 sank to lows last seen in the midst of World War II, multifamily completions were down another 43 percent from the year earlier, and manufactured home placements hit their lowest levels since record-keeping began in 1974. Total starts held well below 1 million for the third consecutive year, distinguishing this cycle from past recoveries when construction rebounded quickly and strongly once annual starts dipped below that mark.”

• “While still under the shadow of the foreclosure crisis, the housing market may be starting, however slowly, to turn the corner. The number and share of loans more than 90 days delinquent, but not in foreclosure, are finally falling. The impact of the crisis will nonetheless linger as millions of loans work their way through the protracted foreclosure process.”

• “The strength of the housing recovery, when it does occur, will rest on how fully employment bounces back. The first four months of 2011 brought promising news on the jobs front, with payrolls expanding by nearly $200,000 per month on average. If these advances continue and energy prices settle down, a sustainable recovery could at last be developing.”

• “Local housing markets will revive at different rates, in proportion to the depths they hit during the recession, the amount of overbuilding that occurred and the speed at which job growth resumes … Many of the states with the farthest to go — Nevada, Florida, Georgia, Arizona and California — are those that claimed the largest share of homebuilding activity during the boom.”

• “Once consumers perceive that a floor has formed under house prices, their re-entry into the market could quickly burn through the lean inventory of unsold new homes and slim down the excess supply of existing homes on the market.”

This article originally appeared in the July 2011 issue.

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