Inevitable Forces Are Chipping Away at Housing Crisis

Posted by Jim DeBellis on June 23rd, 2011

From time to time one has to get up out of the slimy pit of gloom, step back, and take a little wider and more detached look at the housing market. What seems to be an endless black hole, when viewed up close from the inside with a high definition 3D perspective of every gory detail, can be viewed in terms of trends and outside solutions when you turn the binoculars around.

No, we can’t ignore the fact that purchases of existing homes fell 3.8 percent in May from the April rate to an annual pace that would be the lowest in 14 years. Yes, the price of a median home is down another 5 percent since a year ago and unemployment in home construction is double the overall rate. But flogging ourselves with a statistical analysis of the present doesn’t really tell us anything about the future.

For instance, here’s a tidbit of hope: Investment in residential real estate will most likely make a positive contribution to GDP in 2011, which hasn’t happened since 2005. That’s a big stride. We’ve said that it will probably have to be investors that pull real estate out of the depths of hell, as they have the money, the risk tolerance, and the business sense to buy in this buyer’s market. They are creating a burgeoning rental market which is beginning to thrive.

By itself, this isn’t a game-changer; but when when real estate has been dragging the broader economy down for five years, this contribution to the nation’s wealth is a welcome relief. Add to that the fact that residential construction will also see positive growth for the first time since 2005, and you begin to see a trend that could make real estate a positive force. Both investors and builders will drive business to Home Depot, Lowe’s, hardware stores, furniture stores, and so on. Paint and concrete and curtains will come off the shelves and add to GDP and drive up employment too. Every bonfire starts with a bit of kindling and a small spark and grows from there.

Homes are more affordable than they’ve been in many years. We add three million or more new Americans to the population year after year after year. Sooner or later, homes will have to sell and more will have to be built. The housing market is still in bad shape, but every slide has to end eventually, and there are inevitable forces pushing us towards recovery.