Housing starts won’t save us

Minnesota’s jobless data continue to show construction jobs are getting whacked.

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But I’ll confess I didn’t get the larger, national picture on this until Aaron Dickinson, a Realtor and source in MPR’s Public Insight Network, made this point: In past recessions, new housing construction was the business that always seemed to save the economy.

This time it’s the economy that will have to save new housing construction.

This chart from the Federal Reserve Bank of St. Louis tells us a lot about the current situation. The gray bars mark recessions and the red line construction starts for new, privately owned housing.

(Click on the chart for a larger view or here for a really large view.)


Looking at the chart, there’s no doubt new home building came roaring out of the past seven recessions. Not so now.

The housing and mortgage crisis has thrown supply and demand out of whack. Anemic job growth in the overall economy makes it less likely people will be buying new homes. That’s why housing starts are staggering out of this recession and why it won’t save us this time.

Minnesota construction jobs continue to get hammered, down 2,500 in August; down 8,100 from the same time a year ago and falling much faster compared to the construction sector nationally.

Many of those are tied to the home building trades. If you haven’t read Tuesday’s terrific MPR story on people in the construction trades who built the Twin Cities but can’t afford to live here now, read it.

Nationally, builder confidence remains in a deep rut.

“In general, builders haven’t seen any reason for improved optimism in market conditions over the past month,” the National Association of Home Builders said last week. “If anything, consumer uncertainty has increased, and builders feel their hands are tied until potential home buyers feel more secure about the job market and economy.”

Last week’s Commerce Department data showed a mixed bag. August housing starts were up 10.5 percent from July and 2.2 percent from last year. But housing permits and completions were still down from last year.

It’s a big deal because new home building has a big economic reach — from all those folks in the trades needing work to the cities and towns that rely on homeowner property taxes to pay for services.

If housing construction won’t light a fire under this economy, what will?


What you’re seeing in the housing market where you live? Post something below or drop us a line directly.