The Washington Post had a story today with the headline, “Is Housing Bouncing Back?” It’s the kind of thing sure to put a curse on the market for the next year. After all, we’ve been hearing such predictions — the famous return to “the new normal” — since even before the roof fell in around 2007.
No, the housing market is not bouncing back if you mean a return to the go-go years of the 2000s, or even the price increases and building seen for much of the post-World War II era. The nation faces a huge unsold inventory of houses, big debt overhang for consumers, millions owing more on their mortgages than their houses are worth (“underwater”) and millions more foreclosed or facing it. Working all this out will take years. And even then, we won’t see a return of the bubble years, and a good thing. Today the National Association of Realtors said the decline in house sales from 2007 to 2010 was actually 14 percent worse than previously calculated.
The reality of the moment is that multi-family housing is a relative bright spot. Places that didn’t see overbuilding will sustain some new construction. Prices will need to go lower in many instances to lure buyers. Regions that overbuilt face years of digging out. And the old location, location, location adage remains. We haven’t reached a new normal yet. Churn and instability remain. Maybe we’ve reached the end of the beginning, certainly not the beginning of the end of this huge reset.
Today’s Econ Haiku:
In booming Asia
What could possibly go wrong?
Oh, North Korea