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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

January 21, 2015 at 10:02 AM

Housing starts still seeking new normal

The quick briefing today is that  housing starts rose 4.4 percent in December. Separate out single-family houses and they increased 7.2 percent from the previous month. Both numbers show the market continues to recover. But here’s the context:

STARTSfredgraph

In other words, these may be the best numbers since 2008, but the crash was already well underway by then. The damage was so great that today’s “good news” — and it is — still leaves housing starts in the bust territory of this boom-and-bust industry.

Also note how the number of starts in the 2000s boom was still less than peaks in the 1970s and even briefly in the early 1980s. The nature of the crisis was not house-building per se — although much of it was poor quality tract houses in unsustainable Sunbelt locations. Rather, it was the way Wall Street “financialized” mortgages, encouraging risk all along the line.

It takes time to come back from a financial bust.

Below is not precisely apples-to-apples, but it shows how Washington and Seattle-Tacoma-Bellevue are doing:

WAfredgraph

SEAfredgraph

So builders are slowly recovering. More people have jobs — but the jobs that replaced those lost during the Great Recession tend to pay less. Most Americans have seen their pay stagnate over the past 15 years, something unprecedented since the Great Depression. So while today’s housing news continues a favorable trend, it faces headwinds, not least from the financial health of potential buyers.

Another unknown: the future of all the “investor-owned” rental properties in subdivisions. The Wall Street boyz got in with cheap money, snapped up the properties and flipped the best. Many remain as zombie properties.


Today’s Econ Haiku:

Amazon wind farms

What will they do for profits?

Wall Street and hot air


 

 

 

Comments | More in Housing | Topics: Housing starts, Seattle housing

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