The mystery of the housing-free recovery

Artist rendering of a proposed mixed-use retail/affordable housing/medical development that would replace a long-vacant lot at Eighth Street and Airport Way in south Stockton.

It’s a subject that even Jeff Michael, the deep-digging analyst at UOP, calls “a little bit of a mystery.”

Still the Sacramento Bee takes a whack at explaining.

“… Past recovery cycles took from two to seven years to go from bust to boom, when at least 15,000 houses were added each year (In Sacramento). The Great Recession technically ended in 2009, eight years ago, yet construction remains relatively low.

“That history raises a question: Are we nearing the end of a recovery cycle without a housing boom? If so, it would be the first time in 40 years that’s happened in Sacramento.”

And in Stockton.

“In the early 2000s, that ($300,000 to $350,000) would have bought a good-size home in the suburbs. But it’s nearly impossible to build larger single-family homes in that price range now because of land costs, developer fees, labor costs and the rising costs of materials, builders and industry analysts said.

“Construction costs are increasing faster than new home prices,” one knowledgeable guy says in the story. “You have deals that just don’t pencil out.”

Also there’s a shortage of construction workers. Many bailed after the last crash.

Stockton’s somnolent housing market can be explained largely (though not entirely) by its weakness relative to its regional neighbors. But Sacramento’s economy is robust.

Regulation is the usual suspect. But what’s causing the cost of everything to go up?  Inflation is modest: consumer prices in the United States increased 2.1 percent year-over-year in December 2016.

Lawmakers have introduced a raft of bills to address the crisis. Still, one is left with the feeling that forces not yet completely understood are stunting the market.

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    Michael Fitzgerald

    Mike Fitzgerald is The Record’s award-winning metro columnist. His column runs in the paper three times a week. Born in San Francisco, he was raised in Stockton. His column covers diverse beats including, sometimes, the offbeat. Read Full
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