Markets & Economy

Why is the housing market so sluggish?

Costs of healthcare and education, and lack of decent-paying jobs, are all factors
  • Sales of new homes need about a decade at the current rate of gains just to get to historical “healthy.”
  • Loan standards don't seem to be the problem -- instead, it's the issues underlying affordability.

Here in the second half of the seventh year of economic recovery, the national housing market is still just pooping along. Nothing bad -- the national rate of price appreciation running about 5 percent, steadily so. Sales of existing homes are up (again) about 10 percent year-over-year, but it will take another five years at that pace to resemble “hot,” relative to population gains. Sales of new homes need about a decade at the current rate of gains just to get to historical “healthy.” Where’s the fire? By the third year of any previous recovery, the Fed has had to lean into housing to slow it down. Where's the fire? Mortgage rates are back to the all-time low, where we were four years ago. One measure of housing as a “deal”: compare the after-tax mortgage rate to the rate of price appreciation. If prices are rising faster than interest costs accumulate, deal! For most homebuyers, 3.50 percent converts to something close to 2.75 percent, and pri...