Housing bubble: The “Wealth” is Gone, but the Debt Remains
by Bill McBride on 6/14/2013 02:00:00 PM
THE total wealth of American households has recovered from the financial crisis and Great Recession, according to the Federal Reserve Board. But … many Americans, particularly younger adults who took on heavy debt to acquire homes before the housing bubble collapsed, are lagging.
During the housing boom, said William R. Emmons, the chief economist of the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis, “exactly the people you would think need to act conservatively were doing the opposite.” Homeownership rates, and mortgage debt levels, rose for younger households, as well as for less educated and minority ones. Those groups suffered more during the crisis, he said, and have been slower to recover.Mr. Emmons compiled average wealth figures for different groups from the triennial surveys … older households are down just 3 percent on average, while those headed by middle-age people are down about 10 percent. But the decline is nearly 40 percent for the younger group.
During the housing boom, households ended up with more of their wealth in real estate than before, and mortgage debt rose to record levels relative to the size of the economy. The proportion of wealth in homes is now back to close to the level of the 1990s, but the debt levels remain high by historical standards.
Click on graph for larger image.
This graph based on the Fed’s Flow of Funds report shows household real estate assets and mortgage debt as a percent of GDP.
As Norris noted, the bubble wealth is gone, but the debt remains (still high on a historical basis). This was especially hard on younger households since they bought during the housing bubble.
Read more at http://www.calculatedriskblog.com/2013/06/housing-bubble-wealth-is-gone-but-debt.html#5ebCmySFJbleFrzC.99
Housing Starts decline sharply in April to 853,000 SAAR
by Bill McBride on 5/16/2013
From the Census Bureau: Permits, Starts and Completions
Privately-owned housing starts in April were at a seasonally adjusted annual rate of 853,000. This is 16.5 percent below the revised March estimate of 1,021,000, but is 13.1 percent above the April 2012 rate of 754,000.
Single-family housing starts in April were at a rate of 610,000; this is 2.1 percent below the revised March figure of 623,000. The April rate for units in buildings with five units or more was 234,000.
Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,017,000. This is 14.3 percent above the revised March rate of 890,000 and is 35.8 percent above the April 2012 estimate of 749,000.
Single-family authorizations in April were at a rate of 617,000; this is 3.0 percent above the revised March figure of 599,000. Authorizations of units in buildings with five units or more were at a rate of 374,000 in April.
Click on graph for larger image.
The first graph shows single and multi-family housing starts for the last several years.
Multi-family starts (red, 2+ units) decreased sharply in April following the sharp increase in March (Multi-family is volatile month-to-month).
Single-family starts (blue) declined to 610,000 in April (Note: March was revised up from 619 thousand to 623 thousand).
The second graph shows total and single unit starts since 1968.
This shows the huge collapse following the housing bubble, and that housing starts have been generally increasing after moving sideways for about two years and a half years.
This was well below expectations of 969 thousand starts in April, mostly due to the sharp decrease in multi-family starts. Total starts in April were only up 13.1% from April 2012; however single family starts were up 20.8% year-over-year. I’ll have more later …
Read more at http://www.calculatedriskblog.com/2013/05/housing-starts-decline-sharply-in-april.html#8HKI8RCPXZelZDt8.99