In recent months several articles concerning the housing recovery have caught my eye. Together they paint a portrait of a housing market that is finally recovering from almost seven years of recession. But it’s a different kind of recovery. And the house being “recovered” is a different kind of house than was being built before the crash.
In an article in the Wall Street Journal entitled “Housing Passes a Milestone,” David Wessel writes convincingly that, for all the danger still ahead, “the housing bust is over.” Housing inventories are down, housing starts are up, and in “each of the past four quarters, housing construction has added to economic growth.” A telling statistic: “Economists aren’t always right, but on this at least they agree: A new Wall Street Journal survey of forecasters found 44 believe the housing market has reached its bottom; only three don’t.”
Different Kind of Housing Recovery
A report out from The Demand Institute notes that, yes, there is a housing recovery underway, but it looks different that recoveries of the past (“The Shifting Nature of U.S. Housing Demand“). Current market dynamics lead researchers to conclude:
- The recovery will be led by demand from buyers for rental properties
- Young people—who were particularly hard hit by the recession— and immigrants will lead the demand for rental properties
- Rental demand will help to clear the huge oversupply of existing homes for sale
- The average size of the American home will shrink
- Consumer spending patterns will reflect the different nature of housing demand during this recovery
- Despite the number of Americans who have been hurt financially by the housing crash, the desire to own a home remains strong
Different Kind of House
Not only is this a different kind of recovery, the market is recovering a different kind of house. Richard Defendorf of Green Building Advisor did some analysis of their own on the much publicized McGraw-Hill SmartMarket Report, noting that in 2011,
“green homes comprised 17% of the overall residential construction market, the analysis showed. The core finding of the study, though, is that green construction is expected to comprise between 29% and 38% of the market by 2016 — a potential fivefold increase, from $17 billion in 2011 to somewhere within the range of $87 billion to $114 billion in 2016.” (quoted from “Consumers Associate Green Building With High Quality“)
Apparently the house emerging from the recession is somewhat different than its pre-recession counterpart. Defendorf goes on to conclude, “For many people, green building is becoming an expectation – a de facto standard that makes barely-to-code construction and remodeling seem inadequate.” It may have taken a recession to change minds, but it sounds like the old way of building the house is dying away. Long live the new house.