A 120-Day Sign of Recovery? By Kelli Lundgren

Would you like to hear something positive rather than slanderous this election year?  How about this: I predict a notable increase in residential construction jobs in the next twelve months to help pull the U.S. further out of this recession.   I’m not an economist yet I follow real estate closely and am a real estate developer.

Here’s what’s happening: Most U.S. recessions historically start their recovery by an increased demand for new home construction.   We have been waiting a long time for this to occur, longer than usual.  

Yet in the last 120 days, just this summer, supplies of existing homes in the U.S. have shrunk dramatically, remarkably.  I witnessed availability shrink significantly in Utah and Hawaii where I track the markets closely. U.S. housing demand has caught up with supply, even when including foreclosed homes.  This means my friends in residential real estate development; general contractors, drywall, framing, foundation, window, paint, and electrical laborers, light fixture retailers, all, will see a pickup in labor and material demand for both new home construction and existing home improvements.

Confidence is back.  Demand for growth is back.  Record low interest rates finally kicked in while pent up demand acted, while supply and demand balanced out, while homeowners now have fewer reasons to sell, keeping their homes off the immediate market.

From my perspective, the 2008 economic crash was an adjustment.  Our economy had been artificially inflated by greed and a government looking the other way; over-built real estate, incredibly easy credit, and inorganic demand… all were ready to burst.  And they did.  I need not have to remind anyone.  

Americans borrowed from far into their futures while Wall Street profited. (First, second and third mortgages, depleted home equities, high credit card debt, exponentially increasing student loan debt, government debt and deficits off and on the books).  We were working in an economy that couldn’t sustain itself, thus it was and still is to a good extent an artificial economy.  

           

Economists remain skeptical, but I do not.  Experts say we’re growing too slowly to make a real estate recovery stick.  It’s possible they are right.  However, growing slowly may be good.  If Americans are cutting back on credit purchases and buying homes only because they need to and not to flip homes over speculation, we have a more realistic-growth economy, not one that is borrowing exponentially from the future. 

America, we can do this if we do it right.  We can grow based on current consumption dollars rather than future dollars.  New construction jobs can pull people off welfare.  More tax revenue comes in. Government can then cut back on expenditures that would have otherwise sideswiped a weaker economy.  And the cycle begins.

No matter who is elected president in November, he needs to oversee this key new trend carefully, and not neglect regulations, inflation, etc. as was done before 2008.  Almost nothing better can help pull our nation out of a recession than a healthy housing market.  

True, outside variables could possibly hinder residential construction expansion: a European recession or depression, world conflict, climate change, more droughts, the budget deficit, oil price gouging, an obstructionist Congress, or an unpredicted event.  But I am too optimistic right now in my own home building industry to buy into the bickering this election year. 

This comes from the entrepreneurial side of this independent voter.  My liberal side says only build highly-energy efficient homes, starting now.  And create a plan to wean our world off of oil.  This seems an ideal new starting point where we can be proactive.

Let’s keep moving forward on this slow-growing path out of this recession.  New construction jobs stimulated by free market rather than federal stimulus are fantastic.  And real-time (not artificial) economic growth based on new jobs and less consumer debt is even better.

http://www.bloomberg.com/news/2012-09-18/housing-s-wealth-effect-to-start-nudging-u-s-spending-economy.html