Like the rest of the economy, housing is improving in some areas, but has room for improvement in others. In Trulia’s second quarter Housing Barometer out today, key housing indicators are compared to their normal levels prior to the housing crash, and compared to their worst point during the crash.
Trulia’s Chief Economist, Dr. Jed Kolko notes that the recovery has picked up since the start of the year, with improvements seen in 4 out of 5 key measures.
Home prices are 79 percent back to normal, rising 44 percent from one year ago, and Trulia says prices should reach their long-term norm relative to fundamentals late this year or early next. That’s great news.
Home sales are 64 percent back to normal, and although there has been little improvement from this time last year, they are up 3.0 percent from last quarter, so progress is being made.
Also good news is the delinquency and foreclosure rate which has eased down, now 74 percent back to normal, from 53 percent back to normal at this time last year.
New construction starts are 50 percent back to normal, led by multifamily construction, which hit its highest share of overall construction in 40 years. But who’s living in these multifamily units? The first time buyers that are being left out and unable to buy their first home.
Where are all of the first time buyers?
Dr. Kolko mentioned that all but one metric has improved, and what the economy lacks is a healthy employment rate for young adults, which continues to worsen.
The employment rate for 25-34 year-olds, a key age group for household formation and first-time homeownership, fell back to 35 percent back to normal, down from 39 percent one quarter ago though up from 30 percent one year ago.
“That’s a red flag: jobs for young adults are essential for the housing recovery,” said Dr. Kolko.
Dr. Kolko explains, “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,” he adds. “Until that happens, the clearest signs of recovery will be apartment construction and renter household formation, not first-time home buying.”