'The housing bust appears bigger than the boom' even after 7 years of recovery

Looking at the US economic landscape as it stands now, it appears that in many parts of the country the fall out from the financial crisis has been cleaned up.

The stock market is at all-time highs, the unemployment rate is at levels not seen since before the recession, and wages are on the rise. One notable exception, according to Scott Brown at Raymond James, is the housing market.

The growth of the housing market has been a relative laggard. Given that the epicenter of the financial crisis was the housing market, its no surprise that it has taken longer than the rest of the economy to recover.

"In a number of ways, the housing bust appears bigger than the boom," wrote Brown in a note to clients. "The housing recovery was always expected to take several years, but improvement has been even slower than anticipated."

Brown highlighted a number of housing metrics — such as single family home sales and building permits — that have still not made pre-recession highs or even come near the level of the past two business cycles.

As an explanation, Brown noted that many parts of the real estate market that helped fuel growth in previous cycles have been constrained since the market collapsed.

Here's the full breakdown from Brown:

"That's partly because the supply chain was crushed during the downturn. Building costs are high. There's been a shortage of skilled workers. Shell-shocked potential buyers were reluctant to return to the market or to move up. Millennials have been slow to settle down and start families. Banks have been reluctant to lend to first-time buyers. Rents have been outpacing overall inflation, which would normally encourage home buying, but home prices have also risen, freezing out potential buyers."

Essentially, Brown's analysis identifies three issues holding back the market.

One, builders have had a difficult time getting new homes up due to a variety of increased costs associated with labor shortages and materials.

Two, young people that would be first-time buyers have delayed home purchases and have found it hard to find homes to buy even when they are ready.

And three, economic factors that were supposed to help the housing market — such as low mortgage rates — may actually be dis-incentivizing turnover and leading to a tighter supply.

This has all seized up the supply side of the market and led to a less than dynamic real estate recovery.

While it appears that there may be some relief — housing starts and other data appear to show some heating up in the home supply — Brown was not enthusiastic about breaking the limitations.

"Mortgage rates have risen since the election," said the note. "However, as we saw following the Bush tax cuts, upper income households are likely to take some of their tax savings and buy second homes and vacation homes."

Thus the problem plaguing the market may persist and the housing recovery will remain lackluster.

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