The Housing Market Is Finally Starting to Look Healthy

A passel of news stories and reports say that millennials aren't buying homes, whether due to student debt or aversion to debt altogether or whatever.

Now we get a report ATTRIBUTING TO millennials the upsurge in the housing market.

Do any economists know, AT ALL, what they are talking about? All I ever read is contradictory derivative explanations of what they think happened yesterday.

The article is another example of how to 'distort' the housing market outlook. One month's figures, which appear to be an aberration, are not indicative of the overall market. Overall in the month of July, low housing inventory held back sakes, causing the first annual decrease in home sales since November 2015. I guess Mr. Irwin didn't think adding in that fact was important. Millennials are not going to make that big of an impact on the housing market. Housing finance is still being controlled by the government (Fannie, Freddie and the FHA) - lending (credit) standards are still extremely restrictive, and the private markets are nowhere to be found. Rates as low as they are will not bring new entrants into a sorely needed market. It's going to be flat for years - July was an anomaly. Don't drink the 'kool aid' believing the housing sector is going to 'rebound'. Flat it is, and flat it stays.

I chose to read this article because as a San Franciscan, housing is a big part of my city’s economy, and I wanted to learn more about the part of my city’s economy that is struggling so much. As an eighth grader, this year I am going to be studying a lot about homelessness, and I think the first step to understanding why there is so much homelessness is understanding why there are so few homes, and how the state is working to fix it. I thought that choosing articles that would enrich my learning environment would in turn enrich the experience that I get from reading the article.

"In the new Census Bureau report Tuesday, the median sale price for new homes actually fell, to $294,600 from $310,500 in June."

That's approximately 5.5 times the median household income, and real wages remain stagnant, so house buyers must be getting themselves into substantial debt for a home loan. Or maybe most of today's house buyers are in a higher-than median income stratum.

For a housing market to be good there needs to be enough new construction of various types (e.g., single-family, multi-family) of different ownership types (e.g., rentals, for purchase) and prices (or rents costs) so that folks wishing to make housing choices have plenty of options.
When new single-family houses are constructed and bought that usually means that someone is vacating another housing unit which then becomes available for another household to rent or buy.
This is analogous to new car sales: Someone buys a new car and their old car typically goes into the used car inventory for someone else to purchase.

It used to be that starter homes were at least 20 years old in middle class neighborhoods. Now they are new and cost $300,000? The NYTimes thinks that is a good thing? Well, I guess it is if you're making $100,000; and many dual working families are. However, I see this as another housing bust. Homes are too expensive, too big, and the 'belief' that one needs a 'new' house does nothing but increase the number of people that work in construction. Perhaps that is what the NYTimes wants, after all, construction pays well. Except how much more new 'construction' can this country and it's infrastructure absorb? Next week we'll read how construction workers are getting laid off and have no skills to go to another industry. Then it will be the developers fault. Greedy developer.

How about we stop excessive immigration, live in the houses already built, and change our expectations away from 'new' large homes getting built ever further from the cities.

and poor people will still be exploited by renter owners as poor people in this country aren't able to buy a house due to low paying/no jobs. decent housing for poor people is an urgent need, but then there are those greedy white supremacist who buy up all the ones available and jack the rent so high that marginal poor and poor people can only afford to pay rent, but many times other necessaries so saving to make a down payment is impossible.
poor people, this land of so called milk and honey, should be able to purchase a house and take advantage of the benefits of ownership.

And then there is the Ecnomist briefing on the Housing Market, Aug 20th. Subtitld: How America accidentally nationalized its mortgage market.

Having spent my career in corporate America, I would not advise any young person entering the job market to purchase a home particularly in a city or area dependent on one or a few companies. The mindset in the companies for which I've worked is such that at the least drop in business or the merest hint of a decline, layoffs and "cost cutting" occur immediately. The words "Job security" no longer have meaning in corporate America. A house today for a young person would represent a millstone around one's neck if job loss were to occur. Renting is the much better option.

Any survey or study that focuses on the national housing market is a very small part of the story. We do not really live in one country, we live in many. The fact that the housing market might have improved in one area means nothing to those in housing markets that are struggling or depressed. The fact that single family home sales may be improving means nothing for those who are stuck trying to sell condos and the like, which have never recovered their pre-crash values and never will.

I am very sick or reading about how wonderful the housing market is in the United States. Can the poor find adequate affordable housing? No. Can anyone sell a nice house in Detroit? No.

What I would really like to see is a study that correlates housing market recoveries with the amount of federal taxes that go to a region. I would expect that it is much easier to sell a house in an area that does not pay for its roads or its water, for example. The housing market in Connecticut has continued to deteriorate, and Connecticut (the last time I checked) received something like $0.62 back from the federal government for every tax dollar sent to the federal government in income taxes.

We might learn something from such a study. It doesn't help us in the Northeast to learn that the housing market in tropical parts of the country is improving. And who buys those areas all their water, anyway?

Demographics will drive housing today like it did in the mid to late 80's. Many of my friends who got a late start because of the two early 80 recessions didn't get their lives together until the mid too late 80's. Our children are following the same demographic trend. Millennials are getting married buying starter homes and having children. Life does follow a timely path. I think the biggest deterrent to buying homes and starting families is the cost of day care and college debt.

Housing markets are always the strongest just before a crash!

The largest generation of children born in the history of this country were the baby boomers. Let's keep in mind that part of the issue of high demand lagging the last generation is the huge mortgages carried by college graduates.

another headline this morning elsewhere- "July home sales plummet". which is it? oh yeah- statistics! they can be manipulated any way you like! here in CA I don't see any young families getting into homes, unless completely subsidized or handed down from the parents. not sustainable, with lower income jobs waiting for college grads.

Well, according to the Washington Post and the Atlantic, millennials are not buying homes:
http://www.theatlantic.com/magazine/archive/2012/09/the-cheapest-generat...
https://www.washingtonpost.com/opinions/millennials-arent-buying-homes--...

Is this a case of "It depends on who you ask?"

Maybe this is true in the cities. Where I live there are no jobs and you can't sell a house unless you give it away.

"Thank millennials and thank homebuilders who are starting to produce more of the starter houses young people demand."

Wrong!! Millennials, when buying their home have no plans to upgrade every couple of years. They intend to buy just one home, have a 2 kid family and leave it at that.

Until the Republicans and banks screw it up again.

The problem is that so many have been programmed that a house is an investment instead of a place to live.

The US has a wildly distorted housing market, propped up by the Federal Government with a subsidy to home owners that The Economist calculates as $ 150 Billion per year or 1% of the GDP.

The size, design, and availability of mortgages is decided by a government driven by election year politics not market discipline, guarantying the next crisis.

"Nightmare on Main Street. The horror underlying America's housing market"

http://www.economist.com/news/leaders/21705317-americas-housing-system-w...

"Comradely Capitalism. How America accidentally nationalized its mortgage market"

http://www.economist.com/news/briefing/21705316-how-america-accidentally...

After 10 years of healing, home sales have crept up to the lows they usually plumb during recessions on the backs of super low interest rates. Even this production level may not be sustainable for long because the jobs being created are in a series of bubbles that the Fed and Government policy have created such as luxury housing, own-to-rent, auto sales, farmland, higher ed, health care, commodities and the stock market. Paradoxically, starter homes on the peripheries of non-bubble cities may be the only decent investments in an environment where all other assets have been inflated to the moon.

The housing market has been fine for at least three years apart from a couple of regional soft spots. New home sales are only about 13% of existing home sales which is a much more important component of the total housing market. Prices have also largely recovered. In short we have what you could call a "normal" housing market to the extent it's ever normal with a mixture of hot, cold and goldilocks spots but without any signs of RE bubble reappearing nationally. The major factor in the recovery has been low rates (courtesy of QE) which have allowed people to take on new mortgages or re-structure existing debt. There is nothing particularly magic or mysterious about any of this.

The housing market is "finally starting to look healthy?" Come to Atlanta, where every patch of dirt is being built on. The question is, how much longer will it take for an over supply scenerio to take place? When that "finally" happens, we may hear bubbles bursting.

There is another thing that may add to an eventual housing downturn. Aggressive lending. Most first time home buyers are getting FHA loans, which in many cases require only 3% down. And the reality of subprime loans rearing their ugly heads has begun to appear. And when that happens, foreclosures spike. Sound familiar?

LL...thanks for the chuckle...very funny!

Lordonlow, you seem to have some insider knowledge of how the government is working against the middle class...of which I no longer am able to belong to no matter how hard I try to get back into it...hmmm?

Hey Amana's still good, I got a fridge going on 17 years now & no problems!...but I know what you're getting at, true that.

"Those numbers are volatile & include a wide margin for error"....that's the ONLY thing that's true about this whole article. Do your research on millennials & find out how many had to move back home with their parents cause there are no real jobs out there, how many rather rent just in case they need to relocate to get an increase in salary or to land a job, how many need to borrow down payments from Mom & Dad, & how many don't care to buy after seeing what happened to others (including themselves) during the housing/foreclosures crisis of recent years. Do your research. Homes may be selling in some places, but hardly anybody is going high risk anymore.

High home ownership is NOT a sign of healthy housing market. Isn't this what led to the housing bust, collapse of mortgage backed securities, and the last recession?

A bit misleading as the article acknowledges several issues that have really hampered a revitalization of the housing market. There is still too much uncertainty in the job market and weak incomes that are hardly keeping up with inflation. Building smaller, cheaper houses to accommodate lower incomes is actually very good, but does nothing for the houses on the market, not selling all over the place.

My husband and I have a house with a pretty decent value, but finding buyers who could afford it, even in NYC is not that simple, Fortunately, we do not want to sell our home, but there are 4-5 houses for sale in the surrounding blocks we pass on our way in and out. After quite a few months, only one has sold. But they are on the side streets that lead into the highway, so Idk of that makes a big difference. However, I also have friends who are looking to buy as first time homeowners in the mid-late 30's and are having a hard time finding anything affordable except a few coops and condos.

I will say that overall the housing market in NY was never very over inflated because it had already become very expensive starting in the late 90's. I remember when rent was so much cheaper, now in many places it is a mortgage payment. But the mortgage is only the beg with a house (repairs, landscaping, maintenance), so buyer beware.

I don't consider this "healthy".

http://www.zillow.com/boston-ma/home-values/

Are you kidding? Cultural changes are preventing people from buying houses? It's lack of affordable housing and lack of money from low-paying jobs, the ones that were created -- like here in Florida -- after the horrible recession. The only people who could afford homes after the implosion were the one-percenters. So builders focused on that demographic. This is good news about more affordable housing being built but people don't buy if they can't afford it.

We don't build NEARLY enough. Taxes are not the problem. When a median home price is over 500k, like it is in most of CA, t is a sign of a very dysfunctional market and needs to be addressed by long term investment in infrastructure, housing and transportation. But we seem to be having trouble addressing it. Look at all the stumbling blocks people throw in front of Gov. Brown's proposal for increasing development. We could build twice as much housing here and it would not be enough.

The condos they are now trying to sell in my neighborhood for $740K will be swooped up by Chinese families looking to invest their cash in tangible American assets. Saudis already made downtown real estate prices out of reach. Young homeowners need not (can not) apply.....

Short bonds, my friends, because this a world class *top*.
Can you take it to the bank?
Of course not, but that is what I'm doing because the central banks have been running a Ponzi scheme for nearly twenty years and I think they're running it on empty, at this point. They've already impoverished the middle class via the ZIRP/QE system of extraction and it did not work.
They have no Plan B.
Not selling my house, though...
Why?
Because, I need a place to live.
By the time I sell my home and move and buy a new place, I'll lose more in transaction costs than I will save in housing costs. Moreover, that ignores the costs in time and aggravation associated with uprooting myself and moving after over thirty years in one spot.
The financial insiders are desperate to liquidate.
The markets have been rigged and propped and levitated for years and the crooks at the top of the game have yet to get out because they cannot get out. They're trapped in their positions because the market is too thin (illiquid) to allow them to sell en masse.
The oligarchs will break ranks soon and the ensuing financial panic is going to be legendary. Last one out of these markets is a rotten egg...

The inherent assumption in this article is that people should be homeowners. That's not an appropriate choice for many people as it limits mobility in the advent of job losses or change in interest. Could it be that lower home ownership is actually a good thing? That's not even a consideration here.

Agree with most of the article. Housing is recovering but with four caveats. First, all real estate is local. Second, the "size" expectation of the current house is much larger than it used to be (our 1450 square foot house raised our family just fine) and the new houses are definitely larger and three, is it affordable relative to income? Sadly, with incomes flat, the answer is no. Lastly, having built a new home last year, we were lucky. The contractors in our area have a two year backlog because of the number of workers that got out of construction in the downturn (for all contractor professions). No, to forestall the argument, this is in a location where there are few illegal immigrants).

For over 30 years, builders have forgotten about young buyers with crushing student loan debt. Even with an $80K/yr first job, most people with advanced degrees can't afford PITI above $1000/mo because the student loans require $1500/mo payments for twenty years. Make that $800 for PITI if the individual needs a car for a lengthy commute. Would you want to carry two "mortgages" at the same time?

Home ownership is the backbone of the community. Ownership of a two-family house assures a comfortable retirement, in spite of low/middle income working years. Been there, doing that, by the grace of God or gawd.

I dare any builder to offer a two-family home (say, 1500 sq ft, two kitchens, two baths, separate entrances) for $75,000. It can be done.

Greed is what has placed the 99% in dire straits, never able to get ahead on account of exorbitant rents; huge, unaffordable houses; tract housing built on land fills, toxic waste, quicksand, crumbling escarpments, and hills with history of landslides; student loans carrying 8-9% interest instead of 2%.

What a great country this is---not!

Our country needs about a million or so four room tract houses selling for under $60,000---with good jobs nearby, even if they are merely mall jobs six blocks away. Housing needs to be positioned near work centers, and the proportion of affordable housing must match the types of jobs in the area.

Paul, I think the meaning is as follows: "More new homes were sold in July 2016 than in any July during the previous decade." Thus, the original is entirely defensible: "More new homes were sold in July than (new homes were sold in July) in nearly a decade." You changed the meaning by implying a different parenthetical: "More new homes were sold in July than (new homes were sold) in nearly a decade."

Lies, pure and simple, and easily refuted. How? QE3.

Most forget - and that includes media who conveniently "forget" - that QE3 was a particularly nasty strain of fiat money printing and distinct from the previous 2 rounds. Why? Simply, uncle scam was taking zillions of toxic mortgages off of the banksters' rolls and thus relieving them of their bad bets, and putting them on YOUR (taxpayers) shoulders.

And the formal receiving entity? Fannie. If all of that shadow inventory were to be unleashed we'd see the tide go out - and who's swimming naked.

It's a total setup, a con, coupled with Fed rigging via zirp, they are once again brewing the perfect storm, far bigger than 2008. ALl of this nonsense is maximum extraction. Wait for the other shoe to drop, because one thing's for sure, you know it must.

"More new homes were sold in July than in nearly a decade".

Who is editing the NYT business section these days? The statement above is wrong. More new homes were sold in July than in any month during the previous decade. The error is in both the headline and a sentence in the article.

Let's hope that the younger people get a better deal on housing than many people who were coming of age in the 80s and 90s and 2000's. There is still too much expensive housing being built in metropolitan areas while salaries have not kept pace. High property taxes are another reason people didn't and don't buy houses. And, while building houses helps what about affordable decent rentals for people. Not everyone wants to own. Some of us, especially those of us who are single and don't make enough on one salary to own a house or a condo, would like to be able to live close to our jobs in apartments that are decent and don't cost an arm and a leg. I guess the question is why is it that owning is pushed on everyone at the expense of renting? Owning a home has been an albatross for many who lost jobs and can't relocate because of the house. Renting is another problem because those who owned, if they lost the house, moved to rentals and crowded out people like me who don't want or can't afford a home.

In other words, when will America and the builders respond by rehabilitating and restoring apartments or by building affordable decent apartments for 99% of us? Is it better to allow landlords to subdivide apartments, charge outrageous rents for the same, and let the middle and working classes spend over half their earnings on housing? Is it better to force us to live over 50 miles from our jobs? It's not just young people who need decent places to live.