U.S. Housing Market

The U.S. Housing Market

Despite a continuing weak U.S. economy, some have been pointing to an increase in new home construction as a sign that the economy is rebounding. While the U.S. economy remains fragile, housing—which was ravaged by the 2007-2009 recession—has become one of the few bright spots.

In August 2012, new home builds were up a modest 2.3%. September housing starts were up 15%—the highest levels since 2008.9

During previous recessions, residential construction was a major factor in recovery. Not so this time. Why? The homebuilding industry was collateral damage in past recessions. This time around, it was a major cause of the Great Recession. Over-building, brought on by overzealous banks, easy credit and a mountain of debt, has left the U.S. economy in an extremely fragile state.

While new home builds are an encouraging sign for new home builders and those who can afford to have new homes built, there continues to be an oversupply of homes on the market. If you’re not so sure, take a walk around communities in Las Vegas, NV, and Cleveland, OH.

Housing has a long way to go before recovering from the 2008 lows. In many cases, homeowners continue to have mortgages that outpace the value of their homes.

What does 2013 have in store for American homeowners? Analysts think housing prices in the U.S. will rise just one percent—less than inflation. Consumer prices are expected to rise two percent in 2013. Despite all the spending, the property market is expected to get little help from any Fed buying of mortgage-backed debt.10