Anniversaries often are a cause for celebration. And so it is that as we approach the 11th anniversary of the start of the Great Recession, many economists have celebrated the nation’s recovery, citing these signs of the country’s economic vitality:
- The Dow Jones Industrial Average, at almost 27,000, is at a record high; its recession-low of 6,443 isn’t visible in anybody’s rear view mirror.
- The unemployment rate, which peaked at 10%, is now less than 4%.
- Business at the big banks, many of which had to be bailed out by the federal government, is booming.
- Annual auto sales, which sank to a sickly 10 million cars, are back to the industry’s long-term average of around 17 million.
- The consumer confidence index, which sat at a record low of 25 in 2009, is now around 130, a record high.
Interestingly, none of the economists tout the housing industry as being a big factor in the recovery. Never mind that heretofore, housing had led the economy out of every post-WWII recession.
And no wonder. More than a decade after the start of the recession, housing starts sit at about 1.2 million units, which, while up substantially from a low of 500,000 or so in 2011, remain not within earshot of their cyclical high of 2 million units in 2005. (In 2008, starts sat at 900,000 units.)
Yes, it’s true that the median sales price of new single-family houses (in 2017 dollars), which tumbled 16% from 2005 to 2011, has since recovered and hit an all-time high of about $320,000. And, yes, the foreclosure rate is back to normal, and, yes, the national average credit score sits at a record high of 704. And, yes, household formation rates have improved, which should drive demand for new houses.
But, no, the housing industry has not emerged from the recession in the best of shape. Housing starts, the industry’s key indicator, remain close to the typical recession level, and at $270 billion in 2017, the value of new single-family houses added to the housing stock is close to 50% off from the 2005 peak.
Another reason the industry doesn’t have much to celebrate? With slumping housing starts and with a veritable handful of big builders controlling more of the country’s housing activity, the number of active building firms in the U.S. has declined from 75,000 in 2008 to 30,000 this year. That’s a 60% decline and the clearest sign yet of a housing industry in something closer to retreat than recovery. (Those data points come from Metrostudy, a Hanley Wood business that tracks housing activity in major markets.)
Couple all of that with the fact that the average age of BUILDER’s readers is pushing 60 and, well, you might get the idea that housing, in order to regain its health, needs a transfusion of builders who are unscarred by the Great Recession.