Home ownership is a significant indicator of the health of our economy. One key indicator of how that segment is doing comes from new home construction. November’s numbers actually look pretty good at first glance, jumping to 9.3%, but there is something buried inside that is also troubling:
But building permits, a gauge of future construction, rose nearly 11%. The increase was spurred by a 30% increase in apartment permits, to the highest level in three years.
Over the past year, apartment permits have surged roughly 63%. Single-family permits have increased just 6.6% in that time.
This is a mixed bag. The rise in apartment construction is spurred by two factors:
- A flood of foreclosed and short sale homes on the market.
- The inability of people to actual secure a loan for a new home.
Both of these factors are troubling. The first one indicates that we still have rather high foreclosure rate, something we can easily see by published reports, but also the short sales is troubling and that is something not so easily gauged.
The second item comes with having a period of long term unemployment. Being out of work for an extended time makes it harder to secure a loan for a new home. Not only that but with American’s seeing their actual salaries decline, they also see their chances of securing a new home loan diminish.
Of course all of this could be indicative of where the U.S. economy is heading. We might be leaving the era of an ownership society and entering a time where renting becomes the new norm. That’s good news and bad. It means more Americans will be living within their means, but at the same time their net wealth through assets will go down.
Once we see new home construction rise and new apartment construction permits decrease, then we can breath a little more relief. Hopefully when that happens though it will be people buying homes that can actually afford them and until we rid ourselves of the huge income disparity that plagues this nation, I just don’t see that happening.