Housing Recovery: Why New Home Sales Are Lagging
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What is the main topic discussed in this episode?
Your Money Briefing. Money and market stories from The Wall Street Journal. I'm J.R. Whalen in New York. It's been a mystery as to why new home sales haven't recovered along with the full housing sector since the recession. We'll open the door to some answers in a moment. First, these money headlines. Have you noticed your cell phone bill rising?
Why are new home sales lagging despite a broader housing recovery?
You're not alone. I'm American cell phone bills are climbing for the first time in nearly two years as wireless service providers pull back on promotions. Americans are messaging friends, streaming videos, and hailing transportation and other services on their smartphones more than ever. And over the past two years, they've benefited from lower bills and unlimited data usage as national wireless providers have competed fiercely for new customers. The Consumer Price Index for wireless phone service, which is an indicator of current offers from cell phone service providers, ticked up 0.3% in June from a year earlier. That's the first such increase since July of 2016. And the market swings we've seen this year in response to trade policy tensions and interest rate increases are testing Americans' unprecedented embrace of index funds during a nine-year-old U.S.
What short money headlines set the context for this housing conversation?
stock bull market. The flood of money into U.S.
How have cell phone bill and index fund trends been changing recently?
mutual funds and exchange-traded funds that mimic indexes dropped to $3.4 billion in June. That's according to data from research firm Morningstar. And it was the lowest amount of new monthly money for these funds since early 2014. For the first six months of 2018, passive inflows were down 44 percent, compared with the same period a year earlier. This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. Who doesn't like a good mystery? One of those vexing questions is why the sale of new homes has remained so low amid the broader housing sector recovery. Heard on the Street columnist Justin Layhart is here with us to sort out some of these questions and answers. So, Justin, there was an astounding number in your column.
There were about 48,000 home builders in the U.S. in 2012. That's a big number, but that was down from 98,000 just before the recession, but half of them were wiped out?
Yeah.
That just seems like I did not think that there was even a number in the thousands approaching 50,000.
Right. I mean, so, you know, the home building industry has always been tremendously fragmented. The barriers to entry, I mean, there are barriers to entry. You need some money. You needed some money and you needed some know-how to get in there. But it was a, you know, a real sort of business creator industry. And then what happened after the housing bust and the recession financial crisis is that they just got decimated and there's far fewer and there's just, you know, a bunch of, you know, little firms that were, you know, maybe not building a lot of houses or maybe building, you know, 100 or something. They're just gone.
And that number, that 48,000, has not recovered up to that level of the pre-recession threshold.
As far as we can tell. So the data comes from the Census Bureau, and the next round of data won't come out for a little while. But there's other data that we have that pretty much suggests that nothing has happened since then in terms of these little builders coming back.
And as you point out in your column, consolidation, whether it be in the airline industry or the home building sector, that's been a formula for less supply. It could be a change in the way homes are built.
So one of the things that's interesting about the housing bust is that all the big public builders, I think there was concern that some of them would go out of business. Well, not many really did. A handful went bankrupt, and I think all but one of them emerged from bankruptcy as ongoing businesses. So they're all still there. All these big public builders are still around. And there's just been a ton of concentration really in the big markets and the major markets. You just see that they have a much greater share than they used to.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:00–0:20
2
Why are new home sales lagging despite a broader housing recovery?
0:20–1:08
3
What short money headlines set the context for this housing conversation?
1:08–1:11
4
How have cell phone bill and index fund trends been changing recently?
1:11–6:46
Speakers
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