If you really wanted to end the housing market’s woes, you’d do the obvious: Fill vacant homes with some people looking for places to live.
Pop those folks into houses and — presto! — home prices will rise; the mobility of Americans will accelerate; and the construction of new homes will commence.
Yes, we sort of know that there are more homes than households, but last week the president of the New York Federal Reserve Bank put a number on it
Three million.
That’s a serious glut that could take years to work through, said William Dudley. You’d think, four years after the housing bubble burst — three years after in Atlanta — that things would have evened out. But not yet.
For one thing, we are still adding to supply — albeit slowly. Nationally, housing starts are running at a 600,000 unit-per-year pace, up from 530,000 units in early 2009, Dudley said. “It is still extremely low by the standards of the last 50 years. ... One reason why so little housing is being built is that many existing homes stand vacant.”
Not everyone pegs the surplus as pessimistically as Dudley.
In an online piece, economist Edward L. Glaeser of Harvard estimated that the nation entered recession in late 2007 with about 1.4 million excess homes.
When demand is sluggish, the oversupply does not get soaked up quickly.
What’s chilling demand? Of course, the economy has something to do with it — laid-off workers don’t buy a lot of homes. But it’s more than that, starting with “household formation.”
Between March 2009 and March this year, the nation added 357,000 households — one-fifth the pre-recession pace. It was the smallest increase since 1947, according to economist Patrick Newport at IHS Global Insight.
People are “doubling up.” Grown-up kids move back with Mom and Dad.
Moreover, fewer children were born, fewer couples got divorced. U.S. Census Bureau data show that, in 2009, the number of households headed by people 24 and younger fell by 124,000 — that likely reflects the number of adult children living with parents. Meanwhile, the number of households with six or more people rose by 355,000.
Yet an even bigger factor is immigration, argues a University of Southern California economist. About 37 percent of immigrants in Georgia are homeowners, according to Dowell Myers, professor of urban planning and demography.
But the recession has made it harder for immigrants to buy homes, discouraged arrival of new residents from overseas and dramatically slowed movement within the country, too.
First-time home buyers are the pressure behind a smooth flow in the pipeline of a healthy housing market. Without them, it gets a lot harder for people to sell their homes and move up.
And — once they have established themselves and saved a little money — immigrants typically embrace homeownership, he said. “Immigrants are the secret weapon in restoring the health of the housing market. They become the biggest housing consumers after they are here about 10 years or so.”
The relationship between the economy and housing is a mix of causes and effects. More jobs means income to buy homes, and home-building creates jobs, which means more income. Historically, home-building picks up after the jobless rate starts dropping — generally following the labor market by a little more than a year.
Looking for an upside? If you have a secure job, if you want to buy a home, if you can get a loan to do it — well, you’re in luck, Dudley said. “Low mortgage interest rates and falling home prices have together boosted housing affordability to its highest level in 40 years.”
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