Are Homes Where the Health Is?
First, the European debt crisis appears far from resolved, and there’s still a chance for a financial crisis that could spark a recession that could hurt our financial markets and our exports. And an apparent slowdown in China likewise could hurt our industrial production.
For nearly three years, the U.S. manufacturing sector has been expanding. Although domestic business investment in durable goods and consumers buying automobiles have fueled and continue to fuel that growth, a global recession could dampen or even reverse the trend.
Fortunately, there are few signs to date of any slowdown in manufacturing. For example, the Institute of Supply Management’s new orders index is strong and improving. But one thing we have learned in recent years is not to take anything for granted.
For nearly five years now, the biggest single drag on the U.S. economy has been construction, especially residential construction. But now, with global pressures threatening to short-circuit our shaky recovery, there are some signs that a recovery in the housing market could be in sight, if not necessarily around the corner.
An improving housing market could help offset global woes.
Three key metrics released in May were positive:
Housing starts were up 2.6 percent in April over March.
Sales of new home single-family homes increased 3.3 percent.
Sales of existing homes rose 3.4 percent.
“It is no longer just the investors who are taking advantage of high affordability conditions,” says Lawrence Yun, chief economist for the National Association of Realtors, which tracks the sales and prices of existing homes.
“A return of normal home buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices.” Due to reduce inventory, former buyers’ markets are more balanced, and some areas have become a seller’s market, Yun says.
Understand that a recovery in housing doesn’t mean construction at the rates we saw most of the last decade. We all know quite well by now those rates were far from sustainable. But even getting back just to the long-term trend since 1959 of 1.5 million housing starts a year represents a more than doubling of the current rate of construction.
It’s reasonable that housing would begin to recover. First, there has been little increase in the housing supply for more than three years. Meanwhile, employment has risen. While the nation remains 5 million jobs below the January 2008 peak, we are 3.8 million jobs above the February 2010 trough. And 1.8 million of those new jobs came in the past year.
Most of what you hear about the labor market is that the unemployment rate is too high. That’s probably true, but for the housing market and, really, for trucking, what matters more is the economy is adding jobs. Think of the college graduates finally moving out on their own, for example.
Of course, every silver lining comes with a dark cloud, however small.
A growing residential construction market typically draws labor from the same pool that supplies truck drivers. Even with a weak housing market, however, trucking companies are struggling to find enough qualified drivers. In the April 2012 Randall-Reilly MarketPulse survey of trucking conditions, nearly 55 percent of trucking executives identified driver availability as their top concern.
Lack of drivers is holding back growth and perhaps even some replacement. “There’s no sense adding trucks if we can’t find qualified drivers to operate them,” said one executive. “Can’t hire drivers or would grow,” said another.
All in all, however, a housing recovery is definitely something to hope for.
Avery Vise is executive director, trucking research and analysis for Randall-Reilly Business Media and Information.
