THE AVENUE SEPTEMBER 17, 2009
So it looks like the housing sector will soon start contributing--a little, in some places--to the economic recovery after contributing mightily to national breakdown.
According to the Census Bureau, privately owned housing starts in August rose 1.5 percent above July levels to a seasonally adjusted annual rate of 589,000, which represents the fastest building pace since last November. Such a boost is welcome, as even a tepid recovery in house construction could boost gross domestic product growth by as much as 0.5 percent, according to some estimates, and so bolster the stabilization and gathering recovery of the economy.
And yet, as with everything else about the nation’s economy and recovery, the story is variegated, and remains sobering--just as it is in this quarter’s just-released MetroMonitor from Brookings. For one thing, while new starts surged by 24 percent in the Northeast, they were flat in the Midwest and West, and fell 2.4 percent in the South. At the same time, those searching for signs of relief or a return to the constant boom of the pre-crash era should keep a sense of perspective. August’s gains still leave U.S. housing starts down about 30 percent below the August 2008 annualized rate of 849,000 and point to what will likely be a much slower pace of activity over the next decade. Further weighing on the numbers surely is the large overhang of unsold or foreclosing existing homes in places like Modesto, Las Vegas, and Orlando. Such factors clearly forecast reduced levels of home construction for a good long while and suggest we should not look to housing as a major driver of future GDP growth as we negotiate the great economic “reset.”