The new year has opened with a sense of growing optimism for housing.

Existing home sales climbed 5% in December while inventories dropped more than 9% to a 6.2 months-supply, down from 7.2 in November, which should help reduce downward pressure on home prices and increase confidence in the housing sector.

Single-family housing starts rose 4.4% in December to a seasonally-adjusted annual rate of 470,000, their fastest pace since the end of the home buyer tax credit program in 2010. This was consistent with recent improvements in builder confidence, as indicated by the NAHB/Wells Fargo Housing Market Index (HMI), which rose to 25 in January ― its highest level since the summer of 2007.

From an unsustainably high level in November, starts in buildings with five housing units or more fell 28% in December to a rate of 164,000 units, which was still 69% above the pace of a year earlier.

Although overall construction hiring slowed somewhat in December, 2011 is expected to be the first year since 2006 in which total hires exceeded total job losses in the construction sector.

Consumer prices and producer prices ― including building materials ― were both flat at the end of 2011, after increases earlier in the year.

The NAHB/First American Improving Market Index (IMI) has grown to 76 markets, many of which rely on health care and educational institutions for a solid economic base. As construction and other sectors continue to improve in 2012, the list of cities on the IMI is expected to grow.

And housing has been receiving attention from the Federal Reserve, which remains concerned over foreclosures, prices and tight credit conditions, even as improvements in multifamily building provides a boost to some areas.

Examining problems in the housing market ― including an excess supply of vacant homes, reduced availability of mortgage credit and an inefficient foreclosure process ― a Fed white paper concludes that restoring health to the housing market is necessary to promote a more robust economic recovery. While suggesting possible solutions, the paper indicates that there is no one policy that will accomplish this task.

Latest Posts

• Pending Home Sales Decline in December
  Pending home sales fell 3.5% in December after reaching a 19-month high. However, the December level was 5.6% above the level of a year ago. Posted: Jan. 25
  
  
• Strong Increase in Existing Home Sales
  Existing home sales rose for a third consecutive month in December, climbing 5.0% to a seasonally adjusted annual rate of 4.61 million. This reduced the inventory of existing homes for sale by 9.2% to 2.38 million ― a 6.2-month supply, down from a 7.2 months in November. Posted: Jan. 20
  
  
• CPI Holds Steady While Real Rents Notch Third Consecutive Monthly Increase
  The Consumer Price Index for All Urban Consumers (CPI-U) remained unchanged for the second month in a row. With apartment vacancy rates tightening appreciably over recent quarters, however, rental rates have started to rebound. NAHB’s measure of real rental rates increased at an average annualized rate of 2.6% during the fourth quarter of 2011. Posted: Jan. 20
  
  
• Multifamily Production Down From Previous Month, But Still Up Year-Over-Year
  The Census Bureau’s preliminary estimate of starts in buildings with five or more apartments came in at a seasonally adjusted annual rate of 164,000 units for December. While this was down 28% from November, starts were up 69% over a year earlier. Posted: Jan. 19
  
  
• Single-Family Construction Up Again
  Single-family housing starts increased 4.4% in December to a seasonally-adjusted annual rate of 470,000, the best monthly number since May 2010 when the home buyer tax credit ended. Posted: Jan. 19
  
  
• Producer Prices in December — A Flat End to the Year
  Producer Price Indexes (PPI) for December showed prices for finished goods declining 0.1% following sharp increases early in the year. Prices for construction materials and supplies followed a similar pattern. Posted: Jan. 18
  
  
• Builders’ Sentiment Up for Fourth Straight Month
  The NAHB/Wells Fargo Housing Market Index (HMI) rose to 25 in January, indicating the highest level of builder confidence in the single-family housing market since June 2007. Posted: Jan. 18
  
  
• Federal Open Market Committee Minutes: A Glimpse Behind the Curtain
  In its Dec. 13 minutes, the Federal Reserve’s monetary policy committee saw housing market conditions depressed by the inventory of foreclosed properties, weak demand, tight mortgage credit and uncertainty over future home prices. Posted: Jan. 13
  
  
• Improving Markets Index: Jackson, Miss.
  The NAHB/First American Improving Markets Index (IMI) now stands at 76 and includes Jackson, Miss., which has benefited from its local health care sector and higher education institutions. Posted: Jan. 12
  
  
• New NAHB Research: Apartment Rent Estimating Model
  A new rent estimating model from NAHB can give builders and prospective renters an idea of how the addition of a particular amenity affects the rents charged for similar apartments in the region. Posted: Jan. 12
  
  
• Fed Beige Book: Modest Pace of Growth Continues for Most Districts
  The latest Beige Book from the Federal Reserve indicates that economic activity expanded at a “modest to moderate pace” in nearly all 12 Fed districts, while the residential market continued to struggle overall and multifamily rentals provided a boost in several areas. Posted: Jan. 12
  
  
• Federal Reserve Weighs In on Housing
  A Federal Reserve white paper issued on Jan. 4 discusses current problems in the housing market and how to address them. Posted: Jan. 11
  
  
• Construction Hiring Slows While Overall Hiring Increases, Per November JOLTS Data
  Construction hires slowed to 309,000 in November, in a tie for the second lowest month of the year, but total hires for 2011 were still on pace to exceed total construction job losses for the first time since 2006. Posted: Jan. 10

Eye on the Economy is a bi-weekly digest of the latest economic and housing policy news, analysis and studies as posted on NAHB’s free Eye on Housing blog. The preceding is a reissue of the Jan. 26 edition. To subscribe to Eye on the Economy, click here.

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