When looking at the housing recovery through the lens of prices, we appear to be well on our way. However, according to economists at online real estate marketplace, Trulia, prices are only half of the picture.
Prices were up 11 percent year-over-year in August, according to Trulia, which monitors list prices, but construction activity is severely lagging.
Construction permits for the year are between 60 and 70 percent of their historical averages from 1990 through 2012, according to Trulia.
Additionally, when it comes to price gains and increases in construction, markets tend to be experiencing one or the other. Markets that have experienced rapid price growth are experiencing meager construction activity.
“Investors and builders have bet on different local markets,” said Jed Kolko, chief economist at Trulia.
“Investors have bought in the boom-and-bust metros,” according to Kolko. On the other hand, “[b]uilders, however, are betting on markets that avoided the worst of the crash, like Boston, much of Texas, and the expensive California coast,” Kolko said.
Las Vegas, for example, topped the charts with a 33.6 percent increase in asking price year-over-year in August. However, the level of construction permits year-to-date in Las Vegas is just 39 percent of the market’s historical norm.
Sacramento, California; Oakland California; and Riverside-San Bernardino, California, demonstrate similar trends with annual price gains above 25 percent but construction activity ranging between 38 and 60 percent of historical norms.
Two exceptions to the current either/or trend are Orange County, California, and San Jose, California. Both of these markets posted annual price gains above 20 percent in August, and construction permit activity in both markets is higher than historical norms.
In the rental market, Trulia identified a continuation in rising rents with a wide discrepancy in growth among apartment rents and single-family home rents.
Overall, rents rose 3.5 percent annually in August. However, apartment rents rose 3.9 percent, while single-family home rents rose just 1.6 percent, according to the Trulia Rent Monitor.
Among the 25 largest rental markets in the nation, Seattle, Washington, experienced the greatest increase in rents year-over-year in August – a 9.8 percent increase.
Apartment rents in the market increased 10.5 percent, while single-family home rents rose just 2 percent, according to Trulia.
Portland, Oregon, ranked second with an overall rent increase of 8.2 percent year-over-year in August. Miami, Florida, followed with a 7 percent increase in rents.
Houston, Texas, posted the fourth-highest rent increase in August, but it was an exception to the general trend. Rents increased 6.7 percent overall in Houston, but single-family home rents posted a higher increase than apartment rents – 7.4 percent and 6.6 percent, respectively.
By Krista Franks Brock