Is Housing FINALLY on the Way Up?
If you look through our blog archives, you will find several posts that suggest the housing crisis might be nearing an end. Unfortunately, like many issues in this frustrating economy, those short-term positive projections proved to just short hills on this roller coaster of a recovery. Undaunted, we’re taking another look at national and local housing numbers and, again, we see some reason for optimism.
Nationally, June housing starts were at the highest rate since October 2008. Locally, single family housing permits are on pace to top 3,300 in 2012. This would be the highest figure since 2009. Keep in mind, though, that this figure is still well below the annual number of single family permits we saw in the region prior to the recession. Between 2000 and 2007, we averaged more than 10,000 permits a year.
One other caveat: building permits don’t always translate into housing starts, and ultimately housing units, but the fact that builders are beginning to seek more permits does suggest that they see more opportunity in the months ahead.
One other bit of good housing news comes from area Realtors. According to the Kansas City Regional Association of Realtors, homes sold (both new and existing) in June brought an average price of $184,222. This is the highest monthly average since August 2007. Home sales activity has picked up significantly this year as well. The region is at a pace to top 25,000 home sales in 2012. This would be the highest annual total since 2009.
Undoubtedly, our historically low mortgage rates are contributing to this good news. But at least equally important is the fact that inventories (the total number of homes for sale) have dropped. With fewer new homes entering the market and many owners of existing homes waiting for the market to rebound before putting their homes up for sale, inventories are at the lowest point since at we started collecting this data in 2006. If the housing market is no longer flooded with too many homes for sale, home prices should stabilize and begin to grow, although probably not at the rapid pace we experienced before the housing bubble burst.
This good housing news comes at an interesting time. Employment numbers have largely been disappointing this year, so the economy is not yet firing on all cylinders. But once other parts of the economy begin to get some traction, the housing sector should be able to contribute to growth instead of being the economic drag it has been in recent years.