On Aug. 2 in Los Angeles, Barbra Streisand launched a 9-city victory-lap tour to rave reviews. Opening <i>The Music ... The Mem'ries ... The Magic</i> show, the ballad, "The Way We Were" tugs the heart-strings from the band's opening chord progression.
For fans one of America's all-time classiest and truly classic pop icons, the hope would be that this victory lap goes on and on.
Meanwhile, the title "The Way We Were," strikes its own kind of chord in the housing business as mid-summer fades into late summer "dog days," uncertainty continues to prevail as the mode of the moment, and focus shifts from expectation to execution through the balance of this year of many moods.
A number of housing economy observers appear to be ready to declare that the industry's recovery has grown long in the tooth, and is prone now to turn from modest gains to a period of pause, or worse. Fortune economics pundit Chris Matthews pines that housing failed to reach "escape velocity," a physics term that refers to the minimum speed needed for an object to clear gravity's tug from a massive body (i.e. the Great Recession).
Matthews spotlights analysis from Trulia chief economist Ralph McLaughlin, whose astute insights on housing trend trajectories zero in on second-derivative "growth rate" factors on a rolling 12-month timeline rather than the choppier, noisier one- or three-month time measures most housing analysts look at. Indeed, McLaughlin's key take-aways show two areas that could be interpreted--as they were by Matthews--as lackluster.
One is this:
The rate of housing start growth is slowing. July represents the fourth straight month where the 12-month rolling total was flat or less than the previous month. Still, the total was the most starts in a 12-month period since May 2008.
The other so-called sign of summer doldrums, per McLaughlin:
The wave of single-family starts this year still isn’t showing signs of rising the tide for construction jobs. The number of construction jobs per housing starts hit a 10-year low in July, likely due to persistent labor shortages.
So, that second-derivative value, growth in housing starts over time, has gone down in the 12-month time-set. Fortune's Matthews takes this data point and pairs it with a statistically misleading assertion that that the National Association of Home Builders confidence indicator is weaker than a year ago to make the following statement:
It’s not exactly clear why the housing recovery seems to be stalling out. Demographic trends are in housing’s favor, as the median American age is 26. Economists generally predict that as this cohort continues to age, they will seek single-family housing much like their parents did.
But mortgage lenders continue to be wary of lending to all but the most creditworthy borrowers, as evidenced by the relatively high median credit score for newly issued mortgages. Furthermore, homebuilders have been focusing their efforts on the higher end of the market, in response to this tight credit and widening economic inequality that has left the middle class economically strapped.
Fact is, most people whose ears are very close to the ground in the home building and residential development community would not agree that "the housing recovery seems to be stalling out." Nor would they attest to the factual accuracy of Matthews statements about the mortgage lending environment or home builders' key areas of market segment focus.
What's happening is this. The ground is moving under foot in a number of areas, and it seems that data points that have been historically dependable as indicators no longer serve as the clear economic signals they once might have.
In fact, mortgage lenders are expanding the credit box and agencies are adding people to the universe of those who now can qualify for loans at more manageable terms, and the pool of people who can buy--especially as rents spiral in many markets--is deeper. What's more home builders have been focusing for 24 months or more on re-booting their entry-level community programs, and the number of neighborhoods around the country that have grand-opened offering lower-priced product in the past six months is in the many hundreds.
Demand for those lower-priced homes has been strong.
So, the period from now through the frenetic months ahead, is about execution, deliveries, and rigorous, high-quality, high-efficiency operations. Fletcher Groves' signature mantra around velocity--another physics term that blends speed with direction, and in the case of home building operations, it's a hybrid of workflow pace and economic value creation--is what will finally bring housing to what Matthews refers to as "escape velocity."
When home builders not only sell and build entry level homes, but also profit from their sale and construction, that's when housing will hit "escape velocity." When people escape the gravitational mass of budget-busting, ever spiraling monthly rents, and buy new homes, and outfit them for how it is they want to live, that's when the nation's economy will hit "escape velocity." That's when housing becomes an afterburner that can thrust the broader economy beyond the Great Recession's gravitational tug.
Meanwhile, for encouragement, look at "The Way We Were." How far we've come comes clear in this data from Zillow on the path of housing healing represented by the decline in U.S. negative equity since its peak between the fourth quarter of 2011 and the first quarter of 2012, at about 31.4% of all homeowners with mortgage loans.
Now, 12.1% of homes with a mortgage are underwater--still a long way to go, but far, far away from "The Way We Were."
Here it is, as only Babs can rock it.