Single-Family Recovery Is ‘Uneven and Below Par’

The recovery in the single-family market is severely lagging the recovery in multifamily sector, according to two economists at the Cleveland Federal Reserve Bank.

Overall, housing starts remain at low levels compared to the two previous decades. In fact, they are hovering around the levels seen during the low point of the recession in the early 1990sa time when the U.S. population was about 20% below where it stands today, according to the researchers Daniel Hartley and Kyle Fee.

They note that construction of new single-family units remains quite low, while construction of multifamily units is back near its average in the late 1990s and early 2000s.

This divergence may reflect the overhang of foreclosed homes on the market, which is constraining single-family building activity.

It also could reflect the permanent impact of the financial crisis as people choose between renting and owning. Some potential homebuyers now realize that rental properties may be a more appropriate housing option for their circumstances. Moreover, underwriting standards have risen, which will delay home purchases for younger families and for individuals with blemished credit records, the authors say.

Their paper is entitled Housing Recovery: How Far Have We Come?

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