The U.S. housing market is such a critical part of a healthy economy that it garners a great deal of attention. One of the reasons for our anemic economic recovery is that this all important market became so overbought that a bubble developed, and when it burst, it nearly crashed our financial system. Each month, the U.S. Department of Housing and Urban Development publishes a report on the state of the housing market. In this article, we’ll take a good look at just how far we’ve come.
The housing market benefits when banks lend. Today, bank lending is near an all-time high. Moreover, as banks increase lending, housing improves, which benefits many other industries. For example, it takes lumber, steel, concrete, bricks, electrical wiring, copper, PVC, nails, etc. to build a house. Several others also benefit from a strong housing market such as: realtors, appliance manufacturers and retailers, flooring companies, drywall installers, loggers, plumbers, electricians, architects, furniture manufacturers and retailers, and the list goes on. Whenever housing came to a grinding halt, hundreds of thousands, perhaps millions, lost their job as a result. Today, however, housing is making a renaissance which is good news for the economy.
According to the U.S. Department of Housing and Urban Development, in July 2010, sales of single family houses were 276,000. Today the number is 454,000. A clear improvement. Also, in July 2010, the median sales price of a home was $204,000. Today it is $271,600. This is another positive sign. Perhaps, one of the most significant stats measures housing inventory. In July 2010, given the number of houses for sales at that time, housing inventory was 9.1 months. Today that number has fallen to 4.1 months. In fact, some areas are reporting a shortage of homes for sale which will only drive prices higher. Higher prices may be welcome news for lenders and homeowners, but for those who have been waiting on the sideline for that perfect buying opportunity, it’s only going to make home ownership more expensive.
Thanks to the Fed, interest rates have remained artificially low. However, if economic growth were to accelerate, interest rates could begin to rise. Higher interest rates would also increase the governments cost to lend which could cause the deficit and debt to increase. Of course, as the economy improves, so will tax receipts as there will be more workers paying into the system. That is, unless entitlements continue to rise. In any event, I think you get the picture. It’s still partly cloudy.
Source: http://www.forbes.com/sites/mikepatton/2013/05/28/the-u-s-housing-market-home-improvement-is-real/