“As long as the economy is adding jobs and growing, housing is going to continue improving,” says Patrick Newport, an economist who follows real estate at the forecasting firm IHS Global Insight in Lexington, Mass.
Two main drivers of progress for the housing market over the past year have been the persistence of low interest rates and the tightening supply of homes available for purchase.
“And since we're not building at normal rates ... the supply keeps getting tighter,” he says.
Of course, rising home prices are a mixed blessing. Owners feel rising wealth, and lenders feel greater confidence about making home loans. But it means the cost of housing, for potential buyers and renters, is going up.
Over time, the market’s tightening should prompt builders to rev up construction of both rental and owner-occupied units. Already, residential construction is adding to the gross domestic product, although it hasn’t been the driving force that it usually is in an economic recovery.
For more than five years, housing was a locus of economic challenges such as foreclosure and construction layoffs. As the unemployment rate rose, the vacancy rate soared. Homes were being lost to foreclosure, and people were doubling up with others rather than buying or renting.
Those trends aren’t over, but the census numbers suggest they are receding.
The quarterly census numbers on vacancy have some flaws, compared with the more thorough survey that the census does every 10 years, Mr. Newport notes.