5 Stats You Need to Know About the Housing Recovery

Five important statistics from Trulia’s Housing Barometer that you should know in order to have a stronger understanding of the housing recovery.

Apr 27, 2014 at 2:14PM

The housing market is recovering — but not in a clean, linear fashion. Rather than progressing from the depths of the recession into a bountiful new boom, the recovery looks like a zigzag line, with some indicators appearing rosy, some seeming downright glum, and some that are a conflicting mix between the two.

Let's take a look at five important statistics from Trulia's Housing Barometer that you should know in order to have a stronger understanding of the housing recovery.

#1: New Construction Starts Are Apartment-Centric
One solid indicator of the strength of the housing market is a metric called "new construction starts." This measures the number of new units (condos, townhomes, single-family houses) that developers are building.

During the bubble (pre-recession), developers overbuilt, resulting in a market glut. During the depths of the recession, new construction screeched to a halt, which caused massive job losses in the construction industry.

Now we're experiencing a shaky, zigzag return to normalcy. This time last year, new construction starts were 45 percent of the way back to normal. This year's starts have worsened slightly: new construction starts are only 44 percent of the way back to normal.

Single-family homes and condominiums are the biggest laggers. The bulk of new construction is apartment construction, which indicates that builders are preparing to shelter Millennials, who are moving out of their parent's homes to become renters.

#2: Unemployment for Young People Is Still High
Speaking of Millennials ...

The employment picture for Americans age 25 to 34 has improved, although the overall picture is still lagging. Employment for this age group is 39 percent of the way back to normal (based on a pre-bubble definition of normalcy), which is a massive improvement from last year, when employment was only 32 percent of the way to regaining normal status. However, jobs need to grow substantially before young people can experience historically normal levels of employment.

Why are we focused on employment in an article about housing? Because people ages 25 to 34 are responsible for a large percentage of "new household formation" — a formal way of saying that this is the age at which many people move out of the dorms (or out of their parents' house), get married, and buy houses. As long as this age group experiences low employment, they'll have less money with which they can buy a home.

As of February 2014, 75.8 percent of people ages 25 to 34 were employed (three-month moving average), a 0.8 percent gain from the previous quarter. This is a definite improvement, although there's still plenty of space for future growth.

#3: Sales of Existing Homes Are Bumpy
One year ago, the sales rate for existing homes had recovered to 53 percent of normal rates. Earlier this year, that statistic improved all the way to 79 percent of normalcy, before falling to its current level, representing 61 percent of progress toward regaining normal levels.

In other words: the sales of existing homes are regaining their pre-bubble ground, but the rate at which this improvement is happening is volatile.

This measure, by the way, excludes distressed sales (such as foreclosures and short sales), which are often purchased by investors.

Why is there so much volatility? The rise in home prices, coupled with a slight rise in interest rates, reduces affordability. As home values continue to rise, it makes sense that sales might decline slightly, or at least become erratic as the market adjusts to the new pricing levels. Still, the overall trajectory points to improvement.

#4: Delinquencies and Foreclosures Are Returning to Normal
Here's more good news: the rates of delinquencies and foreclosures are also returning back to their pre-bubble levels. It's now 63 percent of the way back to normal, a large improvement over the 42 percent progress from the previous year.

The foreclosures that had previously sat on the market have been sold, and most of the remaining foreclosure inventory is concentrated in three states: Florida, New York, and New Jersey. Why? These are "judicial-foreclosure" states, which means the process of foreclosing a home involves a long court proceeding that can drag out for years.

#5: Homes Are Still Undervalued, But Improving
Despite a surge in home prices over the last year, Trulia's Bubble Watch reported homes are still undervalued in most major markets nationwide. (Trulia measures "normal" values based on neighborhood rents, affordability, and pre-bubble prices.) However, homes are closer than ever to regaining their "normal" value.

In the first quarter of 2014, homes nationwide were undervalued by about 5 percent, a steep improvement over the 15 percent undervaluation that homes experienced at the worst point of the housing burst.

In other words, homes are 67 percent on their way to regaining their normal values.

Price gains have slowed recently, partly due to higher interest rates (as well as severe winter weather), although home prices generally continue to improve.

The Bottom Line
What's the chief takeaway? Home prices are slowly-but-steadily rising. Sales of both existing homes as well as new-construction homes are improving. More young people are moving into apartments, and are likely to purchase houses, especially as the job market continues to gain ground. And fewer people are losing their homes to foreclosure.

The housing market, in other words, is showing overall improvement, although some metrics (home prices) look rosier than others (employment, new construction.) The overall recovery isn't a neat, straight line, but rather a scattered picture of the many variables that, together, weave the tapestry that values American homes.

This article 5 Stats You Need To Know About The Housing Recovery originally appeared on Trulia.com.

Owning a home isn't the only tax "loophole" you can use
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

You may also enjoy these articles focusing on the housing market:

Paula Pant is an award-winning jour­nal­ist spe­cial­iz­ing in per­sonal finance, investing, real estate and entre­pre­neur­ship. She's a former Deputy News Editor of the Colorado Daily (EW Scripps).

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers