Why Isn't The Housing Market Booming The Way Experts Expected?

Interest rates are near historic lows and consumer confidence is high, but the market isn't booming. One reason may be mobility: people moving from state to state is half what it was two decades ago.

MARY LOUISE KELLY, HOST:

Two things we know - interest rates are low; consumer confidence is high, which means the housing market should be hot. But it is not. It's just OK.

NPR's Chris Arnold has been asking, why?

CHRIS ARNOLD, BYLINE: Here's something you might not realize. Twenty-five years ago, Americans were more than twice as likely to pick up and move from one state to another. Greg Kaplan is an economist at The University of Chicago.

GREG KAPLAN: To me, this is a huge move. It's a huge difference in how people are moving around the country today than they did a generation ago.

ARNOLD: Kaplan's research suggests that a central reason for this change is that people don't have to move as much to find a good job that matches their skills.

KAPLAN: It used to be the case that if computer science was your thing and you wanted to be a software engineer, the best place for you to reap a return on those skills was to go to Silicon Valley. Now, that's probably still true today. It's just less true than it used to be.

ARNOLD: So Kaplan says, if you want to live in Kansas City or Phoenix, maybe to stay close to friends and family, there's a more diverse range of job opportunities in more parts of the country.

KAPLAN: What we call the decline in geographic specificity of occupations basically means you can do everything everywhere. That's a good thing.

ARNOLD: Or, OK, you can't do everything everywhere. But today, we have more options. Some housing experts, though, think that this also might be part of what's stunting the housing market. William Wheaton is a housing economist with MIT.

WILLIAM WHEATON: There's a lot of discussion right now about how sales should be more robust, and they're not given where we are in the stage of the economic recovery.

ARNOLD: Wheaton says Americans are buying the same number of homes that they were 18 years ago. The population has grown since then, so he says sales should be stronger. There are many things going on here. Young people, for one, are taking longer to settle down, get married, buy their first house. But also...

WHEATON: A large part of the activity in the housing market is what we think of as churn. So this people who are buying one house and selling another. Churn is down quite a lot.

ARNOLD: Wheaton says part of this might be because of what Greg Kaplan describes. It also might be...

WHEATON: People are still gun shy. They're just - you know, they have a decent job. They don't want to push it and risk losing that job by spending a lot of time searching for a new job.

ARNOLD: And even when home sales do go through these days, you can sometimes see some of the other problems that are slowing down the market.

ALLI MILBURN: So right now, we're standing in our living room, which is also somewhat of a sea of boxes because we're moving.

ARNOLD: Alli Milburn has been renting this apartment with her husband outside Cleveland. Now the couple has just bought a house with more space. It's nearby in a nice neighborhood. One of these boxes is full of gardening tools.

MILBURN: And the house has a really nice backyard. We're kind of just excited, I think, to finally, like, be able to play house for real (laughter).

ARNOLD: But buying this house almost didn't happen. Milburn says the couple just wasn't finding many good houses to choose from.

MILBURN: We were kind of to the point where we were almost done, I think - like, just frustrated because we just weren't finding things.

ARNOLD: Realtors say a tight supply of homes is a problem in a lot of places. And that gets back to the low churn rate that Wheaton talked about, with fewer people selling their houses to buy other houses. Also, Wheaton says in many parts of the country, home prices still haven't risen back to or much above their peaks from the housing bubble. So many people still haven't built up much equity in their homes. In that sense, he says, the market's still recovering. But it's not recovered yet.

WHEATON: And you've got to be recovered before people are sitting on top of little nest eggs of equity and can say, oh, you know, now we can go buy the house down the street we always wanted.

ARNOLD: And that, in the end, may be the biggest drag on housing right now. We just still haven't quite gotten over the hangover from the worst housing crash since the Great Depression.

Chris Arnold, NPR News.

(SOUNDBITE OF HAUSCHKA'S "AGDAM")

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