Trulia: Housing shaking off spring slump?
Barometer shows recovery gains, but something still missing
Trulia (TRLA) is making the case that the underlying fundamentals of the housing industry are on track, and that only a few components are missing from a full-on charge out of the late winter, whole of spring downturn -- first-time buyers.
Prices, sales, and starts are recovering, and prices are near normal levels, but first-time buyers are missing from the housing equation. First-time homebuyers are still missing from the housing recovery, making up just 27% of existing-home buyers according to the May report from the National Association of Realtors. That’s down a bit both from last month and from last year.
That, they say, is what is dragging down housing.
Trulia notes that home-price levels are 79% back to normal, up from 44% one year ago. Prices should reach their long-term norm relative to fundamentals late in 2014 or early in 2015.
Further, they say, delinquency plus the foreclosure rate continued to drop and is now 74% back to normal, from just 53% back to normal one year ago.
Existing home sales, excluding distressed sales, are 64% back to normal – roughly the same as one year ago and up slightly from 61% last quarter.
Trulia’s Bubble Watch shows prices were 3% undervalued in 2014 Q2, compared with 15% at the worst of the housing bust; that means prices are nearly four-fifths (79%) of the way back to their “normal” level of being neither over- nor under-valued.
New construction starts have reached the halfway mark, at 50% back to normal, boosted by apartment construction. Year-to-date, multi-unit starts are the highest share of overall construction in 40 years.
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On the downside, they note, the employment rate for 25-34 year-olds, a key age group for household formation and first-time homeownership, fell back to 35% back to normal, down from 39% one quarter ago.
So what’s holding off first-time buyers?
Jed Kolko, chief economist at Trulia, says would-be first-timers are stuck: rising prices and mortgage rates have reduced affordability before young adults have been able to recover from the jobs recession.
“A full recovery that includes first-time homebuyers is still years away; many young adults still need to find jobs and keep them long enough to save for a down payment and qualify for a mortgage. Until that happens, the clearest signs of recovery will be apartment construction and renter household formation, not first-time home buying,” he says.
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