Housing remains the key to a full recovery

July 6

I have a keen interest in the health of the housing market, and it is not because I am thinking of buying or selling.

I keep wondering when any of the available houses in my neighborhood in Columbia will actually trade. As far as I can tell, the only houses to sell are those going to investors. Within days of the transaction, tradesmen arrive to spruce up the premises and hang a for-sale sign outside. Then, these quickly refurbished houses just sit.

And sit.

There are some houses on my block that have been vacant since the meltdown, more than five years ago. The only sign of life is the occasional mower crew.

I know there are hotter markets, but in places such as mine out in the outer suburbs, it’s a slog. I don’t think the economic recovery can truly gain momentum until the housing market writ large sorts itself out. After all, it was the flood of easy credit and the housing bubble that started this mess.

The mortgage finance giants have been keeping close tabs. Frank E. Nothaft, the chief economist at McLean’s Freddie Mac, estimated in a Web post last week that housing’s contribution to the nation’s gross domestic product actually declined by an annualized 4.2 percent in the first quarter, whereas in 2013 it contributed 0.33 percent to overall GDP growth.

Nothaft blamed a “mighty gut punch” resulting from a spike in mortgage rates in mid-2013. Rates have since retreated, but the prospects for a full market recovery are hardly certain.

Mark Palim, vice president for applied economic and housing research at District-based Fannie Mae, recently wrote that mortgage rates are likely to tick up again as the economy recovers from the soft patch. Home prices nationally are forecasted to increase by approximately 5 percent this year after a 7.6 percent gain in 2013.

That, at least, would mark a shift. The bump in mortgage rates in 2013 served only to slow sales, not depress prices, Palim said.

Still, any improvement is likely to be relative.

“Despite our expectation for a rebound in home sales from the recent lows witnessed so far this year, we expect total home sales to post a small decline in 2014 compared to 2013 — the first retreat in four years,” he concluded.

Oh joy.

Dan Beyers is the founding editor of Capital Business, The Washington Post’s go-to source for news about the region’s business community.
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