Activity in the real estate (RE) market is a good reflection of consumer sentiment. RE is the most sought after, and government encouraged, purchase American's can make. As a homeowner, people become consumers of big ticket sales and the country's GDP perk's up and stays there. For me to believe the signals of economic recovery are getting solid, there will have to be several indications of consumer confidence surging. That is because consumer spending makes up nearly 70% of US GDP. This week there are a couple of encouraging reports on December starts of new housing (the start of construction of a new building intended primarily as a residential building) and existing home sales (the number of previously constructed homes, condominium and co-ops in which a sale closed during the month). These reports seem to signal still weak but improving single family sales in December. Low interest rates together with prices reflecting the weak market combined to close sales at a rate large enough to shrink the excess inventory balloon. Multi-family buildings were the driver for most of the increased building activity.
From Bloomberg regarding sales: Higher mortgage rates appear to have motivated buyers during December as
existing home sales surged 12.3 percent to a higher-than-expected
annual rate of 5.280 million (November revised 20,000 higher to 4.700
million). Details show even strength across regions and a big draw down
in supply to 8.1 months from November's 9.5 months. Supply is the lowest
its been since March. Home prices slipped in the month, down nearly one
percent to a median $168,800.
From Bloomberg regarding building: Housing starts in December slipped back 4.3 percent, following a 3.8
percent rebound in November. The December annualized pace of 0.529
million units fell short of the median forecast for 0.550 million units
and is down 8.2 percent on a year-ago basis. The reversal in December
was led by a 9.0 percent drop in single-family starts, following a 5.8
percent gain the month before. The multifamily component rebounded 17.9
percent after declining 5.0 percent in November.
Housing permits, in contrast, made a 16.7 percent comeback in December
after declining 1.4 percent in November. Overall permits posted at an
annualized rate of 0.635 million units and are down 6.8 percent on a
year-ago basis. The latest boost was led by the multifamily component
which was up a sharp 53.5 percent while single-family permits improved
5.5 percent. However, the Commerce Department noted that building code changes took
effect on January 1 in California, Pennsylvania and New York. In turn,
some of the multifamily strength likely is due to construction companies
getting approval before the tighter regulations.