3 Charts That Show The Housing Market Has Finally Recovered

Dated: December 12 2016

Views: 554



Americans are taking out mortgages like they haven’t since the Great Recession.


According to the Federal Reserve’s flow of funds report, total outstanding mortgage debt grew by 1.9% in the third quarter of 2016. That’s the highest jump in outstanding housing debt since the third quarter of 2008.


The data dovetails with those issued by the Census Bureau of late, which showed that sales of newly constructed homes jumped 17.8% year-over-year, and data from the National Association of Realtors which showed that existing home sales rose nearly 6% in October over 2015 to reach a new cyclical peak.


These large increases in sale volumes suggest sellers are finally willing to put their homes on the market, after years of reluctance for fear of missing out on further home price appreciation. What’s more, with interest rates set to rise, there’s a concern that buyers may run from the market as mortgage costs increase.


1ae6m

As you can see from the above chart, growth in overall housing debt only recently forged into positive territory. But even as Americans have ramped up their willingness to borrow in recent months, there is plenty of room for the housing recovery to run. Afterall, it has long been typical for the American economy to see between 5% and 10% year-over-year increases in housing debt.


We may not see that sort of growth during the current economic expansion, though. Population and household-formation growth is slower today than in decades past. But even if it does, the economy can handle it. The overall ratio of mortgage debt to disposable income is quite low by historical standards.


s1dfx


And that’s a good thing, because economic expansion goes hand in hand with credit expansion, for the obvious reason that more debt gives consumers more money to spend.


All of these are bullish trends for homebuilders as well. A low unemployment rate, accelerating wage growth, and low-but-increasing mortgage debt levels suggest a public primed to buy houses. And there are signs that homebuilders are finally starting to ramp up their activity in earnest in recent months.



eoimj


As you can see from the above chart, housing starts surged more than 25% in October, to reach levels that haven’t been seen since the middle of 2007. We’ve been talking about the housing recovery since at least 2012, but it looks like it has finally begun in earnest.



Source

Blog author image

Mark Ross

For Mark Ross, founder of Ross NW Real Estate and professional real estate broker, real estate has always been the career of choice. During his 30 years in the industry, Mark has gained experience in ....

Latest Blog Posts

How To Become A Landlord

Want to become a landlord? You’re in good company! In today’s hot housing market, rents are on the rise, which may have you wondering whether it’s time to consider becoming a landlord and

Read More

Pandemic Homebuying Remorse

When COVID-19 struck New York City, dietitian Lisa Moskovitz was living in a two-bedroom apartment in Manhattan with her commercial banker husband and 2-year-old twin boys. They had no balcony, no

Read More

Forbearances Decrease Again

For the 20th straight week, servicers’ forbearance portfolio volume dropped — this time a staggering 26 basis points, to 3.50% in the period ending July 11, per a survey from the Mortgage

Read More

What Is The Maximum Price I Can Afford For A House

Imagine you find your dream home: It has a pool, a second-floor terrace and a home office that gets just the right amount of natural sunlight. But it’s at the top of your price range, and even if

Read More