The first couple of years of the economis recovery after the Great Recession were for one a no-show.
The housing industry made no contribution at all.
Now it appears that industry is finally starting to recover. Housing starts are rising at a rapid rate, albeit from a very low level. And last year, residential construction spending, adjusted for inflation, climbed 12 percent, after declining for a record six consecutive years.
The Census Bureau reported this week that single-family housing starts rose to a seasonally adjusted annual rate of 618,000 in February, the highest level since June 2008, months before the collapse of Lehman Brothers turned a recession into a global credit crisis.
Over the last 12 months, 551,000 single-family units were started, and an additional 255,000 multifamily units. As is shown in the accompanying charts, that was an increase of 28 percent from the period a year earlier. Not since the early 1980s, when the economy was coming out of a double-dip recession caused in large part by soaring interest rates that made homes unaffordable, had starts risen so rapidly.
But as can also be seen from the charts, the recovery has not propelled the housing industry far. The total level of starts is still lower than at any time before the recession, and in the fourth quarter of last year, the residential construction industry accounted for only 2.6 percent of the total gross domestic product. That figure was up from the low, reached in mid-2009, of just 2.2 percent, but it was far below the 6.3 percent reached in late 2005, when the housing bubble was at its peak.
The last time housing construction contributed so little to the economy was during World War II.
In normal economic recoveries, housing construction supplies a substantial part of the growth recorded in the first year or two after the recession ends. But in this recovery, it kept shrinking. Over all, real housing spending contracted in every year from 2006 to 2011. But the 12 percent gain last year was the fastest since 1993, another period of recovery.
The building industry, devastated by the collapse of the boom, is only starting to recover. The number of new homes offered for sale peaked at 570,000 in mid-2006, as the boom was ending, and many of the homes built then took years to sell. The latest figures show that only 150,000 new homes were offered for sale in January, including houses that are planned as well as those partly or completely built. That is up only a little from the low of 142,000 reached last summer.
The number of homes being offered before construction begins has remained close to level for two years at a little more than a quarter of the peak. That is a sign that few new communities have been started, despite the rise in housing starts.
by Fred Norris