for the economy to get better, the housing market needs to get better, and vice versa

The economy is slowly getting better. A critical component of the state’s economic health is the housing market, and when it gets better the state economy will get better. Builders will build, assessors will assess, lenders will lend, realtors will realty(?). But for this to happen the economic outlook has to improve…we need buyers to buy, and they won’t without a steady, secure, good paying job.

With spring upon us, the housing market is expected to heat up. The weather is better, bringing out the buyers. School is almost over, meaning families are more willing to put their homes on the market.

Yet Colorado’s housing market doldrums have been persistent. In the following two charts I show annual changes (for each quarter) in one of the main housing price indexes for each of the state’s MSA (the FHFA data). The short story is that in most markets house prices continue to decline (any value below zero is a drop from the same quarter of the previous year). The recent exception is Fort Collins-Loveland.

Grand Junction remains heavily impacted, with the 4th quarter 2011 index down 10 percent from the previous year. The northern Front Range MSAs are doing less badly than their southern counterparts.

From an economics perspective this is interesting in that prices continue to fall despite record low mortgage rates. Part of this is the tightening of lending requirements, which limits the pool of potential buyers. But another part is that the Fed’s commitment to low interest rates over the next 18 months or more removes some of the urgency that buyers might feel if rates were expected to increase. Coupled with a continued slide in prices, households are still being very patient in their housing purchase decisions.

Both the general and housing recoveries remain a long, slow slogs.


0 Responses to “for the economy to get better, the housing market needs to get better, and vice versa”

  1. Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s


%d bloggers like this: