Trulia's Chief Economist takes a monthly look at new construction starts, existing-home sales and the delinquency-plus-foreclosure rate to see how far away we are from a normal housing market.
On the long road of housing recovery, we're all kids in the back seat wondering: are we there yet? After years of bad news about the housing market, it's hard to remember what "normal" looks like.
This month Trulia kicks off the Housing Barometer, a quick review of three key monthly indicators of housing recovery: new construction starts (Census), existing-home sales (NAR), and the delinquency-plus-foreclosure rate (LPS). For each indicator, we checked how bad the numbers got at their worst, and then looked even further back in time, before the bubble, to remind ourselves what "normal" looked like. We're not trying to predict what the new normal will be in the future -- we're just eyeballing the past in order to put this month's housing data into context.
Here's what the February data, released last week, show:
- Construction starts: 22% of the way back from their low in Apr 2009 toward their normal level.
- Existing home sales: 47% of the way back from their low in Nov 2008 toward normal.
- Delinquency + foreclosure rate: 32% of the way back from their high in Jan 2010 toward normal.
To get to a single number that's easy to remember and track over time, we just average these three percentages together. If all three indicators were at their worst, the barometer would be at 0%; if all were back to normal, the barometer would be at 100%. The February 2012 data puts us at 34%: in other words, the housing market is one-third of the way back to normal.
So, are we there yet? No. We still have a long way to go. How long will it take us to get there? Using the same method and measures, one year ago the market was 16% of the way back to normal, which means we've ticked up 18 points in the past year. If we continue to drive at this same pace of 18 points a year, we'll get from 34% today to 100% in late 2015. Kids, sit tight ... it's going to be awhile.
Follow Jed Kolko on Twitter: www.twitter.com/JedKolko