Searching for that Silver Lining

Since we started KCeconomy about a year ago, most economic news has been decidedly bad, from the housing bubble to the financial market turmoil to massive employment losses. Until now, any sign that the economy has bottomed out has been difficult, if not impossible, to find. We at KCeconomy.com believe that the spark that ignited the current crisis — the housing market — will also be the first indicator to tell us when the economy is ready to recover. And we might finally be seeing some long-awaited signs that the housing market is ready to turn around and fire up a recovery.
The first sign? According to an article in today’s edition of The Kansas City Star, many economists are forecasting very low mortgage rates later this summer. These low rates, coupled with home prices that have fallen in recent months and years, will prompt people to enter the housing market. Because housing starts have fallen in recent years, relatively fewer new homes have been added to the housing inventory. All this would indicate that home prices might soon stabilize or even begin to increase again in the not too distant future.
The housing market is very important to economic recovery for many reasons. New home construction can provide quality jobs and investment in equipment and materials, which will boost the economy. But perhaps more importantly, home price stability could give consumers a much needed confidence boost. Even though we are still living in a tenuous labor environment, homeowners would at least be comforted to know that their most valuable physical asset, their home, will not continue to lose value.
Locally, we still see an eight-month inventory of homes on the market today. A balanced market should have a five- to six-month housing inventory. New housing permits are at their lowest point since we began tracking them in 1985. In December, only 136 new housing permits were issued metro-wide. An average December since 2000 would have seen over 730 permits.
We monitor housing local housing data as it comes available. We will continue to do so and look for that first hint of silver lining in the months ahead.