Although here in Hartford we’re generally more concerned about the local real estate markets, the national picture is of interest because of its impact on the overall economy. We believe that housing markets need to broadly stabilize before homeowners (consumers) feel comfortable with their personal financial situations and the banks/investors that hold the mortgages feel comfortable with their balance sheets. In other words, finding a bottom in the housing market is an important first step in beginning to move forward as an economy.
Friday’s announcement of June housing data triggered an interesting exchange on two very well regarded economic blogs. Barry Ritholtz, author of The Big Picture, and Bill, author of Calculated Risk, stake out different interpretations of the data. Both are worth reading as they take different approaches and reach different conclusions.
At The Big Picture, Barry feels that housing markets are nowhere near the bottom in terms of either prices or activity. He makes a number of arguments to support his position; historical comparisons, market trends, weak demand (buyers unable or unwilling to purchase), and additional unmeasured supply (foreclosures and investor-owned properties).
At Calculated Risk, Bill initially separates the two independent market bottoms that he expects to see, then follows up with his positive takeaways from the housing report. Although he is still concerned about excess housing inventory, the slight increase in housing starts signals positive developments nevertheless. He argues that the uptick will begin to lift two drags on the economy by limiting additional construction job losses and increasing the Residential Investment component of the GDP.
Here in Greater Hartford our housing markets are in better shape than many others, making it difficult to weigh in with a strong opinion. That being said, we have seen potential buyers unable to purchase due to their inability to get a loan. We have also seen uncertain employment situations delay home buying decisions. Both economists make arguments that seem plausible and logically supported. Like most economic debates, the only way to determine who is correct (well, closer to correct) is to wait to see how the markets develop.
In the meantime we’ll focus on staying informed on the latest thinking and the possible outcomes.