The Big Story Blog

'The last thing the housing market needs'

Posted at 12:19 PM on December 20, 2011 by Paul Tosto
Filed under: Housing and mortgages

Alex Stenback is a Twin Cities mortgage banker who writes a lot of smart stuff about local housing and mortgage issues. He sent us some great perspective today on the housing starts data today that's helping driving the markets.

His message: Hold on.

"Almost all of the strength in Nov Housing starts was multifamily construction," Stenback, a source in the MPR News Public Insight Network, wrote us.

"This is the lone bright spot in housing, no question, and shows if anything the strength of the rental market, but it is still at very low levels (think pre-1968). That said, multifamily housing is but a small component of residential investment, which is moving merrily sideways at basically the lowest level since before consistent data was available (again, back to pre-1968)."

And when it comes to home construction issues in Minnesota, Stenback says there are two things people are not talking about enough.

1. More inventory is THE last thing the housing market needs. To a large extent, inventory is the problem, not the solution to our housing woes.

2. The fact that there is any meaningful home construction happening says a lot about how broken the housing market is.

The drop in values in MN - about 35% from the peak in Sep '06 has restricted the 'normal' turnover of existing homes: Many people who would like to sell (or need to sell)cannot or will not because their homes value has declined to the point where they would be writing a substantial check to sell it.

We wind up with a supply vacuum in certain segments of the market, which the home builders step in to fill.

This is not a bad thing, per se, but in the long/macro view we risk excacerbating the problem by adding additional inventory which will act as a brake on home price appreciation even after the economy recovers.

Got a perspective to share on the local housing construction market? Drop us a line.


About Paul Tosto

Paul Tosto

Paul Tosto writes the Big Story Blog for MPR News. He joined the newsroom in 2008 after more than 20 years reporting on education, politics and the economy for news wires and newspapers across the country.