Good News on Housing Recovery, but Challenges Remain

Roughly half of all Americans prefer to live in suburban areas, about a quarter prefer urban areas and just over 20% prefer rural communities, according to a Trulia survey conducted last November.

“As we get into the recovery, suburban areas are growing faster than urban areas,” said McLaughlin. “That is a sign that the urbanization trend we saw start to happen at the beginning of the recovery was more of a blip rather than a new rule.”

Moreover, the percentage of households living in urban neighborhoods in 2013 was lower among nearly all age groups compared to 2000.

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“So again, this shows there really isn’t an urbanization trend among households,” said McLaughlin.

Over the past five years, the share of searches on Trulia in suburban-urban zip code areas has held fairly constant, at roughly a four-to-one-ratio for suburban searches.

“Home buyers are saying they prefer modern and modest sized homes in the suburbs with amenities,” he said, adding that 44% of Americans say they want to live in a house between 1,400 and 2,600 square feet.

Recovery in All Regions, but Pace Varies

Delving below the national numbers, NAHB Senior Economist Robert Denk said that housing market conditions are improving in all regions, but the pace of recovery continues to vary by state and region.

“We’ve gotten to the point in the recovery where we no longer have problems that came with the housing bust,” said Denk. “It now is really a matter of housing markets reconnecting to the fundamental drivers, and that is employment. Production has been rebounding in all regions, prices have been moving up and new foreclosures are back to more normal levels.”

Using the 2000-2003 period as a healthy benchmark when single-family starts averaged 1.3 million units on an annual basis, NAHB is projecting that single-family production, which bottomed out at an average 27% of normal production in early 2009, will rise to 74% of normal by the fourth quarter of 2016 and climb to 91% of normal by the end of 2017. Single-family production currently stands at 53% of normal activity.

The hardest hit areas during the downturn were a combination of the bubble states – California, Arizona, Nevada and Florida – and the industrial Midwest. The bubble states had the most excessive price and production spikes, while the problems in the Midwest were more related to fundamental economic weakness.

The most successful recoveries are happening now in the energy states, including North Dakota, Wyoming, Texas, Montana and Louisiana.

Other states exhibiting strong employment and housing growth include South Carolina, Utah, Tennessee, Idaho, Oregon and North Carolina.

In another way of looking at the long road back to normal, by the end of 2017, the top 40% of states will be back to 99% or more of normal production levels, compared to the bottom 20%, which will still be below 73%.

“Keep in mind that with all of these buckets, the numbers keep getting higher,” said Denk. “There is broad-based improvement across the country.”

Source: NAHB