Trulia’s Chief Economist Jed Kolko reveals that latest findings from Trulia’s Housing Barometer. The recovery is now two-thirds of the way back to normal. Existing home sales have returned to their long-term normal level, while construction lags significantly. The recovery is not a straight line: it moves through different phases.
Since February 2012, Trulia TRLA +0.35%’s Housing Barometer has charted how quickly the housing market is moving back to “normal.” We summarize three key housing market indicators: construction starts (Census), existing home sales (NAR), and the delinquency-plus-foreclosure rate (LPS First Look). For each indicator, we compare this month’s data to (1) how bad the numbers got at their worst and (2) their pre-bubble “normal” levels.
In August 2013, all three measures improved: construction starts and existing home sales rose slightly, while the delinquency + foreclosure rate moved strongly downward:
•Construction starts increased a bit, but still far from normal. Starts were at an 891,000 seasonally adjusted annualized rate – up 1% from July and 19% year-over-year. Still, construction starts are 40% of the way back to normal – the slowest recovering measure of Trulia’s Housing Barometer.
•Existing home sales have returned to normal. Sales rose in August to a seasonally adjusted annualized rate of 5.48 million – that’s up 13% year-over-year, and up 29% year-over-year when foreclosures and short sales are excluded. Overall, existing home sales are 99% back to normal, even though foreclosures and short sales still make up roughly one eighth of all existing home sales.
•The delinquency + foreclosure rate continued its downward march. The share of mortgages in delinquency or foreclosure dropped to 8.66% in August, the lowest level in over 5 years. The combined delinquency + foreclosure rate is 60% back to normal.
Averaging these three percentages together, the housing market is now 67% back to normal, compared with just 42% one year ago. As the recovery matures, some types of housing activity, like sales and price levels, have returned to near-normal, while others, like construction and household formation, remain far from normal. The housing recovery doesn’t follow a straight line; instead, it moves through phases, with some measures of housing activity returning to normal long before others do.
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