We now have a fairly complete look at the health of the housing market over the last two months and it’s looking pretty weak.
Pricing is at 2003 levels, mortgage applications are at levels last seen in the mid-to-late 1990s despite record low rates, inventories are back up to August 2009 levels, new homes sales are at the second-lowest level on record, homebuilder confidence dipped back down to where it was in the dark days of March 2009, and housing starts are at a multi-decade low.
All of this before considering that the pending home sales index, or the pipeline of future existing home sales based on contracts signed without the tax credit, plummeted by 30% in June.
While these figures suggest a rather serious situation ahead for housing and the broader economy, one might believe that the other housing market would benefit from such weakness.
Well, not so much. The rental market looks flat-lined.
According to the U.S. Census Bureau, the median asking rent was down 3.5% in the second quarter of this year from its peak in the third quarter of 2008. In addition, the Bureau of Labor Statistics compiles Consumer Price Indexes for Rent and Rental Equivalence and it also shows a moderating trend from the third quarter of 2008.
In addition, there seems to be little room to argue that the drop in rent has been offset by a declining vacancy rate.
While not an official barometer of determining economic health, it certainly doesn’t feel like a recovery knowing that fewer people can afford to live on their own. In fact, it almost seems more fitting of an economic depression than an economic recession.
Irrespective of what it feels like to me, the move from the McMansion to the McMini seems likely to have an ongoing negative impact on the broader economy. It will be detrimental to the developers and owners of multi-unit housing and the banks that have provided them with funding and all of those people who help to take care of those properties along with the suppliers of the materials needed to keep them up.
In fact, I’m sure the implications stretch much farther and could become ensnared with a weakening housing market if the anemic jobs picture does not recover soon. The two sides of housing, then, may be one reason to believe that another bout of recession is on the way.
Disclosure: No positions
