Last fall, I predicted we would see a stronger recovery than many expected, and some recent housing data seems to support my view. While our industry may not feel any such recovery yet, there is evidence that housing may be awakening from a painful slumber and showing promising signs of growth.
The stakes are high for concrete producers, who are trying to hang on as the nation recovers from the deep recession. For many producers, the residential side of their businesses may be the first to get well, particularly since commercial development historically lags behind housing recoveries.
Looking at the current housing picture, mortgage delinquencies eased in February for the first time in more than two years, indicating that the roughest patch in the whole housing mess may be behind us.
But even more telling is the current disconnect between housings starts and demand, pointing to a possible shortage in 2011, which undoubtedly will lead to a spurt in housing starts. The housing recovery has been a key factor in leading our country out of every recession since World War II, and there are many reasons to believe that will be the case again in the next year.
We need 1.5 million new houses per year just to keep up with population growth. If you throw in about 100,000 older housing units that experts say falls out of the inventory annually, the number grows to 1.6 million or more homes per year. We are currently down to about six and a half to seven months in inventory of new and existing homes, and the replacement inventory seems to be slow in coming.
For example, starts of privately owned homes in December 2009 were at a seasonally adjusted annual rate of 557,000, or 4% fewer than November's 580,000 starts. Housing completion numbers also contribute to this picture, with December 2009 privately owned housing completions reaching a 768,000 seasonally adjusted annualized rate. That is down 11.2% from the 865,000 completions in November, and down a whopping 25.3% from the 1.03 million completions in December 2008.
Some want to dismiss the notion of a housing recovery, particularly considering the number of foreclosures in the market. But total foreclosures pale compared to inherent demand driven by population growth. There were 315,716 property foreclosures in January, including default notices, scheduled auctions, and bank repossessions.
Though January's filings were 15% more than a year ago, they were 10% less than December. Even with these foreclosures flowing through the system, new housing starts are still at one-third of the homes we need just to keep up with population growth, and that can't last.
Also, affordability adds to the argument for robust housing growth. The median home price for existing single-family homes in metropolitan areas was $173,200 in 2009, compared to $198,100 in 2008, according to the National Association of Realtors.
The counter-argument to this view are the changes in the mortgage market, particularly as they relate to mortgage qualifications. Only the most stable and creditworthy borrowers are qualifying for new loans as the financial markets continue to nurse their sub-prime mortgage wounds.
And many experts don't see the foreclosure situation getting better until the labor market picks up. Some believe that large numbers of homeowners that have been hanging on by a financial thread are getting to a point where they just can't hold on anymore. Thus, we may see another wave of foreclosed housing if the labor market doesn't improve soon.
This one unquantifiable factor makes judging the strength and timing of the housing recovery difficult to pinpoint. But if history is any indicator, the new housing market should lead the economic recovery.