Housing market about three years away from full recovery

By Vicki Needham - 03/27/12 12:57 PM ET

The housing market is still about three years away from a full recovery, according to a new private analysis released Tuesday. The housing market is still about three years away from a full recovery, according to a new private analysis released Tuesday.

Trulia, a group that tracks trends in the housing market, found that the sector is about one-third of the way back to healthy levels, or about 34 percent ahead of its recessionary lows through February.

The housing barometer is an average of three monthly indicators including construction starts, which are 22 percent of their way back from their low in April 2009; existing home sales, which are 47 percent above their November 2008 low, and delinquency and foreclosure rates, which are 32 percent below their high in January 2010.

"For each indicator, we checked how bad the numbers got at their worst, and then looked even further back in time, before the bubble, to remind ourselves what normal looked like," said Jed Kolko, Trulia chief economist.

"We’re not trying to predict what the new normal will be in the future — we’re just eyeballing the past in order to put this month’s housing data into context," he said.

Using the same method and measures, one year ago the market was 16 percent of the way back to normal.

"If we continue to drive at this same pace of 18 points a year, we’ll get from 34 percent today to 100 percent in late 2015," Kolko said.

Housing starts hit a low of 478,000 nearly three years ago, and had risen back to 698,000 last month — still shy of the 1.5 million that is considered a healthy level by economists.

Existing sales dropped to a low of 3.77 million more than three years ago, have increased to 4.59 million, but are short of the 5.5 million seen in a healthy market.

Sales of previously occupied homes were the best in five years over the warm winter with the January sales pace at the highest level since May 2010, the last month of a federal home-buying tax credit, according to the National Association of Realtors.

The pace of foreclosures hit a high of 14.8 percent more than two years ago, have dropped to 11.7 percent but are still ahead of the 5.25 percent pace.

If all three indicators were at their worst, the barometer would be at 0 percent and, if all were back to normal, the barometer would be at 100 percent.