Sharga: Housing Crisis Slows Recovery
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IRVINE, CA-“Virtually every recovery we’ve had in the last 100 years has been aided significantly by the housing market—housing has helped drag the economy back,” Rick Sharga, EVP at Auction.com, tells GlobeSt.com. “This was the first time a recession was started by the housing market going down, so it’s not a surprise that the recovery is behaving differently because housing is struggling to recover at the same time.”
As GlobeSt.com reported earlier this week, Sharga has been named by Inman News as one of the 100 Most Influential Real Estate Leaders for the second consecutive year. The Inman 100 report is annual list of thought leaders, power brokers, dealmakers and entrepreneurs who embody “ingenuity, strength, conviction, power, persistence and progress,” according to Inman News.
“I think that housing is going to be relatively flat this year,” says Sharga. “I do think we’ll probably wind up moving somewhere between 5 million to 5.1 million units over the course of the year, about what we did in 2013. Home prices will continue to go up, but at a much more modest rate than what we did last year—in the 3% to 5% range, probably.”
Sharga adds that new home starts will likely continue to increase as well. “I don’t think we’ll get anywhere near the million-plus units we saw during the boom years, but we’ll see at least a modest increase in housing starts during the year. We’ll probably also see an increase in multifamily starts. I think multifamily is going to be a good market this year, and I think production will slow down toward the end of the year.”
But housing faces a number of headwinds, Sharga says, and the biggest ones are tied into the general economy. “I do think that credit availability is going to be tight as lenders adjust to the new regulatory standards. I think that’ll slow things down at least in the first half of the year. Also, more broadly, what will slow the market down is lack of jobs.”
Sharga says he believes the unemployment rates are a bit misleading since many among the unemployed are no longer looking for work. “A lot of people have voted themselves off the island and have taken themselves out of the labor pool. I’m watching labor-participation rates more than unemployment rates. Until we see ongoing creation of full-time, good-paying jobs, we’re not going to see housing coming back.”
One of the biggest problems in the unemployment realm is that 25- to 30-year-olds are continuing to have a stubbornly high unemployment and underemployment rates, Sharga adds. “These should be first-time homebuyers to stimulate the whole ecosystem. I don’t see where we would get a significant boost to economic growth in 2014. It’s more likely we’ll continue to see a modest recovery, but at least it’s heading in the right direction, where we’ve been for the last couple of years. The economy, like housing, is finding its way out of the deep hole it carved for itself a few years ago.”
The good news on the housing front is the market should continue to see lower levels of delinquencies and foreclosures, Sharga says. “The loans written over the last few years are defaulting at historically low rates, and it’s given the market a chance to work through the backlog of distressed properties. Homebuilders won’t have to compete with that distressed inventory; we just need job creation to come back.”
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