The housing recovery: Is it actually happening this time?

By: Conrad Neuf , Contributing Writer
In: In The News

After almost 28 years in the housing industry, I bid it goodbye in 2008 -- actually I was pretty much kicked out the door. Home building companies were downsizing drastically as the economy tanked and housing starts in particular took a steep nosedive.

Over the ensuing years, I've read time and again about how a housing recovery was supposedly right around the corner. Unfortunately, they never quite materialized and while I don't claim to be a financial expert, it seemed to me as if they never had a realistic chance of happening.

What about this time? Are we finally starting the long awaited rebound? It depends on whom you believe and how the statistics are interpreted. As for me, I've heard about the housing recovery before so remain a bit of a skeptic.

Why this housing recovery may be for real

How can you argue with data that shows home sales and prices are beginning to rise? A recent report in the Wall Street Journal states that May new home sales were up 2.1 percent from April. This brings the adjusted estimated annual total to 476,000 -- the highest level data has shown since May 2008. The same article indicates that prices are starting to increase as well. Existing home prices were up by 12.1 percent in 20 major U.S. metropolitan areas in April from where they were a year ago.

How about home values? Are they still going down? According to the National Mortgage Professional Magazine, the national average of home values rose in May to their highest level since July 2004. So all this data means that the recovery is for real this time -- or does it?

Why this housing recovery could fizzle out once again

Where have all the skilled workers gone? Evidently, that's what many homebuilders are asking. They're discovering that it can be difficult to meet customer demand when there's no one available to do the framing, plumbing or wiring. Many of the subcontractors and craftspeople who found themselves out of work during the last downturn left the industry.

As someone who went through it firsthand, I can't blame them -- going without an income can get old after a while. According to an article on Yahoo Finance, for contractors and builders in some parts of the country it has turned into a bidding war as they try to entice the remaining skilled workers over to their companies.

Over the years one of the most reliable indicators of a strong housing market has been rising material prices. Lumber, windows, sheetrock and shingles -- their costs all increase as demand goes up. But it doesn't seem to be happening this time -- at least yet. Another article on Yahoo Finance reports that the cost of framing lumber has dropped 20 percent since April. Copper, which is used in wiring and for plumbing pipes, also dropped in price by 20 percent from February through April.

The article cautions against reading too much into the data and mentions that the numbers could change as the recovery gathers strength. However, I purchased construction materials for many years and in my experience their prices almost always follow the basic economic principle of supply and demand. All you need to do is buy plywood when a major hurricane is in the forecast to find evidence of that.

So is the housing recovery for real this time? Perhaps only time will tell. However, when driving through my little town and seeing all the beautiful old houses with reduced sales prices still available, I admit to being a little skeptical.