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Housing Sputters in a Mixed Labor Market
Consumers are not as concerned with losing their jobs and housing inventory continues to be scarce. The increase in job confidence reflects Fannie Mae’s June National Housing Survey. The survey shows that the number of employed consumers who expressed concerns about losing their job dropped to an all-time low in June. This may help tip the scales towards selling more homes in a weak market.
“Since we began collecting monthly National Housing Survey data in June 2010, we’ve seen substantial progress in consumer home price expectations and other key attitudinal measures as the housing recovery gained its footing,” said Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae.
The economy has a long way to go before getting back to what is considered normal. “We do not expect to see ‘normal’ levels of new residential construction, in the region of 1.6 million new housing units per year, before the end of 2016, our original projection. Such a feat would require a pace of growth in housing starts not seen in decades,” Duncan said.
Although the housing market is slowly coming out of the slump from a rough start earlier in the year, housing by itself can’t turn around the economy.
Redfin Chief Economist Nela Richardson said, “In the past, housing has always saved the economy. In the last several economic downturns, the housing market was the first to recover, leading the rest of the economy out of recession. The housing market was the reliable buddy who would bail you out of jail or drive you home at the end of a wild night. But now, the housing market is the needy one in this relationship. The housing market needs the economy to pick up before it can recover.”
In order for the housing market to get the needed boost, it must get past two areas: Lack of inventory in the major metro markets and improved labor markets.
“Income growth has been weak overall and even though job creation has picked up recently, the type of the jobs created tends to be in low-paying sectors and roles that don’t lend themselves to supporting the purchase of a home,” she explained.
There is hope for the remainder of 2014. Continued increasing household net worth should give consumers a boost going into the future. While this net worth is increasing fast, it remains well below the 2006 peak.
“We remain confident that the first-quarter drop in activity will reverse, and we are seeing some positive signs in the current quarter, but economic growth likely will be playing catch-up for the rest of the year,” said Duncan.
Fannie Mae. “National Housing Survey Monthly Indicators” 7 July 2014. http://www.fanniemae.com/portal/research-and-analysis/housing-survey.html
Housing Wire. “Housing-The Economy’s Needy Friend” 7 July 2014. http://www.housingwire.com/blogs/1-rewired/post/30472-housing-the-economys-needy-friend