The post credit crisis recovery has been anemic in terms of GDP and soft in terms of job creation — despite the massive Fed stimulus this entire time.

Given the stock of excess housing built up during the boom, and how leveraged home-owners became during that period, it is no surprise that Housing remains an under-performing sector today.

Exactly how much that is impacting the economy can be seen in a recent study:

“Residential investment, which includes new-home construction as well as renovations and broker commissions, accounted for 19% of GDP growth on average in the first two quarters of postwar recoveries, according to Harvard’s Joint Center for Housing Studies. In turn, GDP growth during those periods averaged nearly 7% at an annualized pace.”

Hence, the current recovery is likely to remain sub-par for the foreseeable future . . .

>

Source:
Recipe for Recovery Lacks Housing’s Spice
Kelly Evans
WSJ, APRIL 18, 2011
http://online.wsj.com/article/SB10001424052748703648304576265302479318880.html

Category: Economy, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “Weak Housing = Anemic Recovery”

  1. Equityval says:

    Construction is weak and will stay weak, but there are early signs that housing is starting to heal. Look at absorption in the rental market. Rental vacancy rate is down 200BP in one year in a tepid job market. No new rental supply will be added in next two years. Rents are going to soar. The economics of buying a house will improve on a relative basis. Stay tuned.

  2. franklin411 says:

    It’s rather inaccurate to call the stimulus “massive.” Only about $500 billion of the multi-trillion dollar measures that people point to as “stimulus” (the Economic Recovery Act, TARP, QE, the Bush tax cut deal) was actually Keynesian in nature. The overwhelming majority of the funds expended represented conservative priorities, such as tax cuts, corporate welfare, and aid to the Chinese.

  3. Petey Wheatstraw says:

    The current recovery (a term that needs the intellectual equivalent of mark-to-fantasy in order to be taken seriously), will not reverse course until losses are realized. The banks don’t give a damn about housing, as is evident by the huge, moldering, unoccupied, and depreciating inventory cluttering the landscape. The banks are in it for the free money coming from above. They have no interest in modifying the practices or curing the defects that required their bailing-out in the first place. The worse it gets, the greater leverage they have.

    True recovery will not happen until the banks are made to eat their losses and regulations are put in place to prevent a recurrence of such bubble-blowing and massive criminality. That they have assimilated the nations financial structure, and by doing so, captured it’s wealth as well as its bureaucracy, I don’t see anything we would recognize as a recovery on the horizon.

    Never forget this:

    “Permit me to issue and control the money of a nation, and I care not who makes its laws.”

    (this quotation is attributed to Mayer Amschel Rothschild. There is a question as to whether he actually said it. Nonetheless and whatever the source, the sentiment is reflective of our current situation).

  4. bulfinch says:

    Rents can’t really soar, as rent is much more a product of local wages/salaries than it is access to credit. You cannot apply for a 3.5 down loan for your rent.

    My rent remained static in 2009 and was actually reduced this year. I pay it off all at once at the top of the new lease term, and never think about it.

  5. Equityval says:

    Bulfinch,
    It’s supply and demand. No new supply on the horizon. Demand is growing due to a) more people with jobs b) more people that view housing as a bad investment or don’t have money for a downpayments and c) people getting bounced from FCs that don’t have the credit to buy anything. Your market may not be seeing increases, but rents are going up in aggregate across the country. The market is going to get a lot tighter in the next two years, unless the unemployment picture gets a lot worse.

  6. James P says:

    The anthropologic principle is first a full belly then a roof overhead. We built them all those new houses. What are they complaining about? The failure to make jobs?

    Part of the problem is the failure to define wealth as a bottom line. Too many equate the expenditure or velocity of money as measure of economic well being. For instance, thinking the rebuild of Japan or waging war is stimulative and good when it is really a net loss of wealth. Money is not wealth.

    We didn’t have any of the make work programs so reviled by conservatives in the 30′s to make jobs. But those programs actually built wealth. Over 70 years later I can still walk on trails built by the Conservation Core and use other facilities built by the WPA. With trillions spent our infrastructure still sucks.

    Trickle down doesn’t work. Trickle up does. Lack of that fundamental understanding of the engine of economy is the failure of this administration and specifically of Geithner and Summers.

  7. [...] US economy is fighting with one hand tied behind its back, i.e. housing.  (Big Picture, Calculated [...]

  8. Thatguy says:

    “Lack of that fundamental understanding of the engine of economy is the failure of this administration and specifically of Geithner and Summers.”

    LOL! That’s a good one. Interesting that you think this is all a misunderstanding and not actually a plan, put in place with full knowledge.
    “It is difficult to get a man to understand something when his job depends on not understanding it.” Upton Sinclair.

    I think that more accurately descibes the case.

  9. louis says:

    Those who strategically default without buying are all future renters.

  10. bulfinch says:

    equityval — there’s no really good way to track actual rents that I know of. Can you point me to hard data set that actually tracks rents to show that rent is actually on the rise across the country? Maybe there is one, but I’m not privy. FWIW, I’m in Austin TX, a hot market (particularly for California diaspora) and I received a rent reduction this year.

    Again, rent is much more dependent on local salary/wages. Incidentally, this is why rent potential is a good way to gauge what a property is worth.