Our View

If housing comeback is for real, recovery is, too

By From page A8 | October 25, 2012

The issue: While jobs numbers are important, housing starts are the real economic drivers

While political analysts were happily hashing over Mitt Romney’s binders of women and what President Barack Obama did or did not say in the Rose Garden about the Benghazi attack, the U.S. Department of Commerce was issuing a report that will have more to do with the president’s re-election than anything said during the debates.

THE DEPARTMENT announced that housing starts in September grew at their fastest rate since July 2008. Last year was the lowest on record for new home construction; this year, housing starts are up 21 percent, with apartment construction especially strong.

Last month, the unemployment rate fell to 7.8 percent from 8.1 percent, breaking the 8 percent barrier for the first time since Obama took office. The jobless rate is symbolically and psychologically important. Voters want to be assured that if they need a job they can find one.

But the housing starts are economically the more important number. In short, there is no economic recovery without a housing recovery, and it looks like Obama has lucked into a full-fledged housing recovery.

The jobless figures can be volatile, and the government is continuously revising them. But all the evidence points to the housing recovery as a trend, not a one-shot aberration but a robust, full-fledged recovery with the potential to pull the broader economy along with it. The National Association of Home Builders expects increases of 26 percent and 30 percent in the next two years.

For one thing, housing permits, a key indicator of future building, jumped 12 percent, to the highest number since the nadir month of July 2008. That number is an annual rate of 894,000, still short of an annual rate of 1.5 million, the benchmark for a truly healthy market.

And the Federal Reserve indicates that mortgages, already at a record low, will stay low and may even go lower.

MAJOR PLAYERS in the industry were pleased. The National Association of Home Builders called it “good, solid evidence” that the recovery is under way. Global economic analyst Dan Greenhaus told the Associated Press, “If there was any doubt that the housing market was undergoing a recovery, even a modest one in the face of the terrible 2008 decline, those doubts should be erased by now.” And HIS Global Insight told USA Today that the housing market was registering “blowout numbers.”

While sales of existing homes are improving, it’s the new homes that boost the economy, with each new home being labor-intensive to build, creating about three new jobs a year and generating sizable expenditures on the durable goods to furnish them.

Housing created an average of 4.7 percent of the Gross Domestic Product and the National Association of Home Builders expects construction to add more than 10 percent a year.

By any measure, that’s a recovery. Now, all Obama has to do is contrive a way to take credit for it — and soon.

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