Year-to-date housing starts (August) are down 55% from the same period a year ago in the Northeast but only 36% in the Midwest. While the recession is much more severe in the Midwest, the recession began earlier in this region with the collapse of auto sales and the exodus of auto parts production plants and arrived very late in the Northeast with the financial crisis that began in September 2008.

Ahead through 2011, the housing recovery will be the strongest in the Northeast. This region is experiencing the mildest recession. It avoided most of the initial problems with subprime mortgages. The resulting housing recession had the least negative impact in this region because its population growth is the lowest of all regions.

The Northeast also escaped most of the direct negative impact from the problems in the auto industry and deep manufacturing cutbacks from September 2008 to May 2009. But it had the largest negative impact from the financial crisis. The region’s dominant share in the mutual fund, insurance, biotechnology, software and consulting industries — all relatively strong — help it emerge quickly from recession.

Compared to the Northeast, the other regions will experience a relatively slower housing and economic recovery. The recovery is being restrained by much weaker conditions in their housing markets. This includes larger surpluses of homes for sale, more rapid home price declines, more foreclosures yet to come and financially weaker homebuilders and local mortgage lenders. Each of these regions is also experiencing more constraint on their recovery from the recent sharp cutbacks in the energy industry as well as from very low state and local government budget reserves.