Another view of what’s “normal” in housing

One thing most real estate market observers do agree on is that our current market conditions are not normal or healthy. But what is a “normal” market anyway?

Real Estate Recovery: Are We There Yet?

March 28, 2012

The first few months of 2012 have seen some pretty encouraging stats, but after years of nothing but bad news about the housing market, it can be hard to gauge what “normal” is anymore.

According to new measure from real estate website Trulia, we’re about a third of the way back to a normal housing market. The bad news? We’ve got a long way to go. Based on Trulia’s calculations, the United States won’t see a full housing market recovery until 2015.


To find out where the U.S. is on the road to recovery, Trulia Chief Economist Jed Kolko dug into a few key monthly data points—construction starts, existing home sales, delinquency and foreclosure rates—then averaged them to get the so-called “Housing Barometer,” a single indicator of housing market health.


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

February’s numbers put the barometer at about 34 percent above its worst point—not awesome, but 18 percentage points above last year’s level of about 16 percent. If the market continues to improve at that same rate, the barometer won’t reach 100 percent until 2015, and that’s only if the economy continues to progress as it has.

There are many other conditions I would also consider normal. Valuation relative to rental parity is an important one. By the measures above, the housing market would have looked normal during the housing bubble, so it isn’t a reliable indicator of market health.