The housing market has been one of the economic segments that has had the hardest time rebounding from the Great Recession. According to a recent assessment from Freddie Mac, only 10 states — Alaska, Hawaii, Louisiana, Montana, North Dakota, South Dakota, Texas, Vermont, West Virginia and Wyoming — have stable housing markets. This is based on Freddie Mac’s Multi-Indicator Market Index (MiMi), which considers home purchase applications, home purchasing power, the rate of on-time mortgage payments and local employment.
“Less than half of the housing markets MiMi covers are showing an improving trend, whereas at this same time last year more than 90 percent of these same markets were headed in the right direction,” said Freddie Mac Chief Economist Frank Nothaft in a written statement to The Washington Post.
While new single-family house construction for 2013 is at a five-year high, according to the newly-released U.S. Census Bureau 2013 Characteristics of New Housing, the number of new homes built in the United States last year was almost a third of that built in 2006.
This data suggests that recovery from the 2007 housing market crash has yet to set in for most Americans. However, new home construction has skyrocketed for one specific class of homes.
According to the Census Bureau, 518,000 of the 569,000 single family homes that were completed in 2013 had air conditioning, and 251,000 had four bedrooms or more. While 180,000 had three or more bathrooms, 305,000 had two or more stories. Nearly half had a floor area of at least 2,400 square feet.
This move toward bigger, more expensive housing seems to be at odds with the national economic health. With most Americans rating the country’s economic conditions as “poor,” according to a May 2014 CNN/ORC International poll; with the number of Americans out of work being estimated at 37.2 percent; with wage growth being frozen for many who are working; and with almost 50 million Americans being recognized as being poor using the Census Bureau’s supplemental measure, there is not enough free capital available to the middle- and lower-classes to encourage new home purchasing.
The housing situation is even further at odds considering that, on Monday, the Census Bureau also released findings suggesting that non-private ground transportation use — buses, rails, taxis, and school- and employer-funded mass transportation — has increased by 51 percent since 2007.
The immediate impression all of this would give is that the so-called “1 percent” is behind this mega-home buying craze. The average home price jumped from $292,200 in 2012 to $324,500 in 2013, and as new home construction is concentrated in the South and the West — regions that have seen the largest per capita income shifts — it would be reasonable to say that the era of the “McMansions” has returned.
“[While] it is known that in absolute number terms the total number of new home sales is still a fraction of what it was before the crisis, the one strata of new home sales which appears to not only not have been impacted but is openly flourishing once more, are the same McMansions which cater to the New Normal uberwealthy (which incidentally are the same as the Old Normal uberwealthy, only wealthier) and which for many symbolize America’s unbridled greed for mega housing no matter the cost,” wrote “Tyler Durden” for the blog ZeroHedge.
This may be presumptuous, however. According to the Census Bureau data, the median floor area for a cash-financed home has 2,286 square feet. For a conventionally-mortgaged home, it was 2,535 square feet. However, for a home purchased with a Veterans Administration-guaranteed loan, it was 2,607 square feet.
While it is unclear what exactly is fueling the current high-value housing craze, it is clear that most Americans feel excluded from it. With housing sales at their lowest pace in 20 months, the current lack of demand during what would be the housing market’s busiest season serves as a reminder of how weak the economy remains and how far the recovery has yet to go.