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Economists Point Out Abnormalities As Housing Market Appears To Heal

It’s been almost a decade since the worse housing crash since the Great Depression. And while the housing market has healed in some ways, in others it’s far from normal.

Single family home construction is rebounding from the trough, but still far below historical norms and the homeownership rate just keeps falling.



There are signs that the U.S. housing market is finally getting back to normal after the worst housing crash since the Great Depression. Sales are pretty solid. Prices are rising. But as NPR’s Chris Arnold reports, appearances can be deceiving.

CHRIS ARNOLD, BYLINE: For 30 years, Greg Spier has been a home builder in Foxborough, Mass. And he feels pretty lucky to be standing on a job site.

GREG SPIER: A lot of people have gone out of the business. If I didn’t have rental property that I was able to, you know, use and cash flow during the downturn, I wouldn’t have survived.

ARNOLD: But today at least, Spier has some blueprints tucked under his arm that he’s brought to show his carpenters. They’re framing out what’s going to be a beautiful new 4,000-square-foot house. Spier says just this summer he’s finally seen a shift. He says at least some people are buying new homes again. He hasn’t even officially listed this one for sale yet…

SPIER: And I’ve got a customer looking at it on Saturday. So – and, you know, this is without even using a broker, people that just drove by.

ARNOLD: So that all sounds good. Still, Spier says while older people, baby boomers are buying homes, first-time homebuyers – those younger couples settling down, millennials – he barely sees them. Well, with one exception. Spier points towards the house next door.

SPIER: One of the houses in our subdivision – the couple won the lottery, and they came and bought a big house. But pretty much…

ARNOLD: …They actually won the lottery?

SPIER: Right there.

ARNOLD: Right there, one lucky young couple bought a big, nice house. But for most millennials…

WILLIAM WHEATON: They’re just renting. Young people are not buying anything.

ARNOLD: That’s William Wheaton. He’s a housing economist at MIT. And he says it’s kind of a funny thing. You look at certain indicators, the housing market looks just fine. Take sales of existing homes.

WHEATON: The sales of houses, most of which is just people buying one house and selling another, sales of single-family housing is about average or above. But what’s not above is the net increase in the number of people owning homes.

ARNOLD: That’s one reason Wheaton says that many new home builders like Spier are still only halfway back to normal levels of construction. Wheaton’s talking about the homeownership rate. As the population grows, we’re not seeing those additional people owning homes. In fact, the opposite is happening.

WHEATON: In the last year, the homeownership rate fell.

ARNOLD: And it’s been falling a lot. Sure, up at the peak of the bubble, maybe the close to 70 percent homeownership rate was too high. But now it’s steadily fallen year after year all the way down to 62.9 percent.

WHEATON: It hasn’t been that low in 50 years. The last time was back in the ’60s.

ARNOLD: Really?

WHEATON: And it is just very, very depressed. So, you know, everybody’s going around and has their one theory or another.

ARNOLD: One is it’s still too hard to get a loan. The banks dispute that. Student debt might be deterring people. Another theory is that first-time homebuyers are still spooked by housing because they saw their parents or relatives get hurt financially when the bubble burst. But Wheaton says there’s another explanation and one that makes sense to him. And that’s that younger people just aren’t getting married as much these days.

WHEATON: The number of people under 35 who have never been married is two times what it was in the ’80, the ’90 or the 2000 census. It’s just off the charts. And once you realize that statistic, then everything else falls in place.

ARNOLD: Wheaton says that’s because if you don’t get married and settle down you’re much less likely to buy a house. Now, common sense would suggest that with rents on the rise, at some point a lot more people – married or not – would get sick of paying rent and want to build equity in their own home or condo. But we’re not seeing much of that yet. Chris Arnold, NPR News, Boston.


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