A swim through housing data

 

Home prices climbed again this spring, even in Las Vegas, where the crash hit so hard that entire neighborhoods of brand new, foreclosed-upon houses were virtually abandoned. We’re supposed to greet the news with glee. It is, after all, an indicator of the strength of the economy. If folks can afford to pay more for houses, then they must be making more money. If more houses are being built, then more jobs are being created, the economy is regaining steam, and we’re all getting richer.

If only. Here’s what we know: Home prices are increasing in most places, in some cases dramatically. Those prices, naturally, are being driven by an increase in sales. Less clear is what’s driving those sales, who’s buying the houses and what it all means for the bigger economy.

To try to suss out some answers, I present a bunch of graphs, focusing mostly on Arizona and Nevada indicators, since those are the two states that saw the biggest housing boom, bust and apparent rebound. I also threw in New Mexico, because it seems to defy regional trends. Thanks to the Federal Reserve Bank of St. Louis for the wonderful data tools.

Housing price index for Nevada, Arizona and New Mexico show that prices are rebounding, mildly.

It’s immediately apparent that housing prices are getting better. But it’s also clear that they’re not anywhere near what they were back in 2007. And they’re not going to get there anytime soon, either. That’s because the apparent rebound is being driven by sales of lower priced houses. People are jumping on good deals, probably because they're cheap, not because they necessarily want that particular home. And it’s not just people, it’s corporations, too (oh, yeah, corporations are people!). Big investors, most notably Blackstone on a national level, are snatching up low-priced homes in bulk and renting them out to all the people who are disgusted with or can’t afford home ownership. By taking those houses off the market, the investors are putting a crunch on the supply of housing that's for sale, which then drives prices up. Meanwhile, many folks are holding back on putting their homes on the market because they still owe more than their house is currently worth (so the supply crunch continues).


Home ownership rates continue to plummet in Arizona and Nevada, even as housing sales increase.

Housing sales are going up, but home ownership is plummeting. This is the natural fallout of the aforementioned trend of investors -- not first-time homeowners -- buying up all the houses.

The number of empty homes in Arizona climbed dramatically even as home prices were going up. They've dropped, slightly, but there are still a lot of empty homes out there.

This is perhaps one of the most flabbergasting graphs of all (only Arizona is shown because the Fed doesn’t have figures for Nevada or New Mexico). Notice how vacancy rates rose even as prices shot up exorbitantly? During the boom, thousands of houses were built not because there was a burgeoning population needing a place to live, but to be used as no more than Monopoly-esque trading chips. They were bought only as investments, in other words, and often remained empty. According to a recent Sonoran Institute report, some 16 million homes were built in the U.S. between 2000 and 2010, but the nation only added 11 million households. Meaning there’s at least five million empty homes sitting around out there. Meanwhile, many of the West’s towns are plagued by a chronic affordable housing crisis. What a world.

Home construction has seen a minor uptick recently, but nowhere near what these states experienced over the last decade and more.

And yet, despite all those empty homes, we’ve started building new ones again. Is this really a good idea? Surely the new construction is a reaction to the perceived housing inventory shortage. But it seems only a matter of time before the market reaches a point at which folks decide, en masse, to list their homes for sale. Inventory crunch ends. All these new homes remain empty. Prices plummet.

Unemployment.jpg
The jobless rate is generally decreasing, but remains far above what it was before the recession.

ConstructionJobs.jpg
Arizona's construction jobs are making a mild comeback, but the same isn't yet true for Nevada and New Mexico

The relationship between jobs and housing isn't all that clear. Unemployment rates are clearly going down from the recession's worst point, but are still much higher than pre-recession levels. In Arizona, some of that might have to do with a tiny rebound in construction jobs, which make up a significant chunk of the state's economy. But if job figures are any indication, Nevada and New Mexico have yet to see any recovery.

So is the housing market making a comeback? Yes. But it's a limited one, at best, fueled more by investors jumping on good deals than by an improving economy or new jobs. Meanwhile, the apparent rebound may be giving a tiny boost to the construction sector, but it's not significant enough to be changing the overall jobs picture in these particular states. In any case, there's little reason to expect the current upswing to continue for long. Hope for a real housing recovery is about as empty as all those houses sitting vacant out there.

Thumbnail photo in e-newsletter courtesy of Flickr user rbglasson, licensed under Creative Commons.

Jonathan Thompson is a senior editor at High Country News.

Matthew Koehler
Matthew Koehler
May 30, 2013 01:10 PM
I don’t at all buy into the notion that the “US Housing market is thawing out.” The following article by Steven Rosenfeld provides some good facts and figures, which the big banks and the big media outlets (largely owned by the same big banks) continue to ignore, as they cheer on more development, consumption and personal debt.

NY Times Ignores Banks’ Latest Role In Distorting The Housing Market
March 22, 2013
By Steven Rosenfeld
Source URL: http://www.alternet.org/ny-[…]e-distorting-housing-market

For example, when you currently have 42% of the homes in Sacramento underwater with a “negative equity” averaging $100,000 below current market values, but then a veteran Sacramento realtor claiming “I’ve also never seen a market turn so quickly” you get a sense that the bubble is still bursting, and will continue to do so for some time.

As Rosenfeld points out, "Zillow research says that 19.4 percent of homeowners are underwater nationwide. 'In total, underwater homeowners owe $1.01 trillion more than their homes are worth,' its February 2013 report said."

20% of all homeowners nation-wide underwater, owing the banks over $1,000,000,000,000.00 more than their homes are worth doesn't sound real optimistic to me either.

Of course, that veteran Sacramento realtor has laughed all the way to the bank (driving his new Mercedes-Benz E63 AMG, no doubt)….first making money hand over fist during the 1990s to 2000s bubble, and now making money hand over fist due to interest rates in the 3% range, which has big-monied investors or the 1%-ers (not struggling families) buying homes like crazy.

And don’t even get me started about the state of commercial and office real estate in this country. If you think we had a bubble burst with housing, let’s see what happens with all this commercial real estate, especially in an era of growing numbers of remote workers, on-line shopping and/or people just generally not having much money to spend any more.

How all this impacts the US lumber industry, lumber prices and logging on national forests, I suppose, is anyone’s guess. Sure, the logging industry and their political supporters are telling us that we need to be doing more logging on our national forests because "demand" for lumber is increasing, but that's almost as misleading as some of these housing market numbers.

For example, U.S. lumber consumption hit 65 billion board feet in 2005, the height of the housing boom. U.S. lumber consumption was about half that at the bottom of the housing market in 2010. Last year, U.S. lumber consumption "rose" to 37.5 billion board feet....but that's just 57.6% of the 65 billion board feet total in 2005.

In other words, U.S. lumber consumption is down roughly 40% from its peak. That's the main reason that 146 North American lumber mills have closed since 2008, and only 14 have reopened or announced plans to do so.

Certainly in an era of over-consumption and over-development a reduction in U.S. lumber consumption should be viewed as a positive, but unfortunately some groups like Montana Wilderness Association, The Wilderness Society, National Wildlife Federation and Trout Unlimited are aggressively lobbying Congress – and spending millions of dollars in Pew Foundation money on expensive TV ads, newspaper ads and an entire campaign – to dramatically increase logging of national forests in Montana by having politicians, like Senator Tester and Senator Baucus, simply start mandating the amount of logging on national forests.

What happens to America's national forest legacy once logging levels, and other forms of resource extraction, are simply just mandated by Senators and Congress-people? That's a free-for-all, race-to-the-bottom that anyone who cares deeply about America's public lands legacy should simply reject outright. Thanks.
Deb Dedon
Deb Dedon Subscriber
Jun 04, 2013 02:12 PM
Without maintenance, 'new' houses often become uninhabitable and can't be salvaged. Their cheap materials are prone to mold at the slightest leak from roof or window, not that this is justification for more cheap housing.

I suspect that investors may eventually hold the same losing hand previously held by the banks. The problem with property flipping is that the tenants might not be able to afford the rent in the long run.
Larry Dirks
Larry Dirks Subscriber
Jun 05, 2013 11:30 AM
Last year, Blackstone purchased and removed a block of aging single family homes several blocks south of my home in Denver, CO and replaced them with seven buildings holding several hundred rental units. Not sure how this conversion of homes to apartments factors into the writer's analysis.
Jonathan Thompson
Jonathan Thompson Subscriber
Jun 05, 2013 02:09 PM
Larry, That is interesting, for sure (and any other readers who have seen similar things in their neighborhoods, please let us know!). I think it's further evidence that the housing recovery isn't all it's cut out to be, and that the increase in home sales isn't necessarily being driven by a better economy or an increase in individuals' buying power. And houses are selling without an increase in the home ownership rate. Thanks for the note!