The surge in new construction: Is the housing market roaring back?

The Week
Workers apply brick facing to a group of new row houses in Chicago on Oct. 17.
.

View photo

Workers apply brick facing to a group of new row houses in Chicago on Oct. 17.

After plenty of false dawns, many experts say the recovery is for real this time

This week, the Commerce Department reported that construction on new homes rose 15 percent in September, reaching its highest level in four years and fueling optimism that a recovery was finally underway in the long-moribund housing market. A genuine rebound could benefit the broader economy immensely, boosting home prices, enlarging household wealth, and spurring activity in key industries such as construction and manufacturing. However, analysts have repeatedly proclaimed the housing market's rebirth, only to see it continue limping along. Is the rebound real this time?

Yes. There's no doubt about it: "OK, OK, housing market, enough already, we get it: You're recovering," says Mark Gongloff at The Huffington Post. "Like Little Orphan Annie warming the heart of Daddy Warbucks with song and pluck, our nation's housing market is finally even winning over cynics like me." New housing construction is still growing at a slower rate than is normal in a healthy economy, but it's part of a "big and sustained rally from a very deep bottom."
"Housing comeback really means it this time"

And that's great news for the economy: "Housing's comeback is the most important economic story of the moment, and maybe the year," says Derek Thompson at The Atlantic. "Houses and cars make or break recoveries," and "in this recovery, depressed residential investment has been the single greatest enemy of growth. That's starting to change."
"Welcome to the recovery!* (*Seriously, we promise, it's real this time)"

No. The economy is too weak to support a housing recovery: The latest housing report is "certainly good, and welcome, news in an otherwise fairly weak and stagnant economy," says Lance Roberts at Advisor Perspectives. But the latest bump is bound to hit a ceiling: Significant home sales can't occur in an economy "impaired by high unemployment, stagnant wages, and negative real income growth." And let's "not get the 'cart in front of the horse' in assuming that the economy is about to come roaring back to life." The economic slowdowns in Europe and China are bound to "have a far greater impact on the domestic economy today than housing can offset."
"Housing starts and permits: Euphoria may be premature"

View this article on TheWeek.com Get 4 Free Issues of The Week

Other stories from this topic:

Like on Facebook - Follow on Twitter - Sign-up for Daily Newsletter
View Comments (5)