The Not-So-Robust Housing Market

The Census Bureau's take on housing market conditions is in.

Ahead of the Federal Open Market Committee meeting on Wednesday, which investors and economists will be watching closely — though few are expecting an interest rate movement this time around — data on the nation’s housing market was published on Tuesday by the Census Bureau. The data wasn’t bad, though not stellar either. That pretty much sums up the condition of most U.S. housing markets most of the time during the years of the recovery, though there are some outliers, such as the condo market of South Florida, which has been going gangbusters for some time now, fueled by a large contingent of international buyers with capital to invest (but even that’s slowing a little, as the dollar remains strong). Exceptions like South Florida aside, the plodding of the housing market adds up to a modest stimulation for commercial property markets (especially retail), but not a stellar one.

In any case, privately owned housing starts in May came in at an annualized rate of 1,036,000 units, according to the bureau. That’s a drop of 11.1 percent from the April estimate of 1,165,000 units, but 5.1 percent above May 2014. Both single-family and multi-family starts were down for the month, with single-family starts at an annualized rate of 680,000 units in May, 5.4 percent below April, and the ever-volatile multi-family starts (more than five units) dropping by 18.5 percent. On the other hand, both single-family and multi-family starts gained when compared to last year: up 6.8 percent and 2.6 percent, respectively. Again, not stellar, but not bad.

Except when compared to previous decades, that is, which make the current rate of housing development wimpy by comparison. Starts of just over 1 million units annually, which is where the rate now stands, used to be how many houses got started during recessions: specifically, during the recessions of the 1970s and ’80s. During healthier decades (economically speaking), starts were usually over 1.5 million units in any given year, and were often over 2 million units. The housing bubble topped even that, but was an ill-starred aberration. Will housing starts ever see 1.5 million or 2 million units a year again? Millennials have the numbers to make it happen, but that’s not all it takes. Unless the pattern of the top 10 percent (or 1 percent, or 0.1 percent) of households hoovering up most of the economy’s productivity gains changes, allowing wages to rise, housing’s going to continue to plod along.

Even so, there’s some good housing news this week. CoreLogic reported on Tuesday that 254,000 properties regained equity in the first quarter of 2015, bringing the total number of mortgaged residential properties with equity at the end of the first quarter of 2015 to about 44.9 million, or nearly 90 percent of all mortgaged properties. The total number of mortgaged residential properties with negative equity is now at 5.1 million, or 10.2 percent of all mortgaged properties. This compares to 6.3 million homes, or 12.9 percent, in the first quarter of 2014. The more equity the better, including for commercial properties that benefit from healthy residential markets.