Three Reasons Why Housing’s Recovery Will Be Slower

Three Reasons Why Housing’s Recovery Will Be Slower

By NICK TIMIRAOS

The remodeled El Patio Apartments near the bayfront in Bradenton.  A classic building with character!

The remodeled El Patio Apartments near the bayfront in Bradenton. A classic building with character!

New York Fed President William Dudley offered his two cents Tuesday on why the housing sector’s contribution to the economy has “stalled out” over the past few quarters.

While he said some decline in activity was to be expected following the jump in mortgage rates last year, “the extent of the slowdown has surprised me given that the recent pace of housing starts—roughly 1 million per year—is far below what is consistent with the economy’s underlying demographics,” he said in a speech Tuesday.

Mr. Dudley outlined three headwinds that he said could keep housing from providing a bigger boost to the economy for a while.

First, Mr. Dudley said mortgage credit is still unavailable to borrowers with lower credit scores. Data from Goldman SachsGS +0.19%, for example, show that the share of homeowners who received loans last year and had credit scores below 620 was at a fraction of a percent, compared to around 13% in 2001, before credit standards were dramatically relaxed.

Second, Mr. Dudley pointed to burgeoning student debt that had delayed the entry of new first-time home buyers. That could make it harder even for existing homeowners to sell their homes and trade up, slowing the traditional turnover of the housing market.

Third, home prices may still be too low in some areas to justify new construction. “The housing downturn was very deep and protracted,” said Mr. Dudley. “It takes time to shift resources back into this area.” In some area, it remains “uneconomic to undertake new home construction,” he said. Others have noted that labor, land and supply costs for home builders have outpaced their ability to raise prices, leading builders to focus instead on putting up fewer homes that can attract higher prices.

For complete article and graphs, CLICK HERE <—–======

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s