Here’s one sign that today’s housing recovery is not your average rebound.
Trulia has decided to scrap its “Housing Barometer” because it says the metrics that the index uses to gauge the market recovery — ones that might normally provide a telling snapshot of its health — no longer mesh together to produce an easily digestible picture.
That’s because the three metrics that the indicator uses — construction starts, existing-home sales, and the delinquency and foreclosure rate — show seemingly schizophrenic symptoms that confound the index’s ability to diagnose the market’s health.
Why is it that today’s market, were it a human patient, might be prescribed antipsychotics?
What’s throwing the index off is that improvements in existing-home sales and delinquency and foreclosure rates have far outpaced improvement in construction.
“When we titled the first Housing Barometer post ‘Are we there yet?’ the answer was clearly ‘no.’ Now, ‘Are we there yet?’ is no longer a yes-or-no question: The answer is yes and no, depending on which aspect of the housing recovery you look at,” said Jed Kolko, chief economist at Trulia.
“Existing-home sales are 99 percent back to normal, while construction is just 40 percent back to normal,” Kolko said. “Tracking the recovery’s progress as a single number is not the best approach anymore.”
Kolko has said construction has lagged because even though there’s a shortage of listings, the market does not have an actual supply shortage. A glut of unlisted foreclosures in many markets means vacancy rates remain elevated.
Another reason cited by Trulia for sluggish construction growth is that household formation, which fuels demand, is only half its normal rate.
Kolko said Trulia plans to introduce a new way to track the recovery soon.
Trulia’s final and most recent Housing Barometer found that the housing market was 67 percent back to normal in August, its healthiest state since the Great Recession.
The barometer was based on the following data:
- Construction starts increased to 891,000 in August, up 1 percent from July but still only 40 percent back to normal.
- Existing-home sales hit 5.48 million in August, their highest level in 6 1/2 years and 99 percent back to normal.
- The delinquency and foreclosure rate dropped to 8.86 percent, its lowest level in more than five years and 60 percent back to normal.