Posted on March - 02 - 2011
Housing Market Steady But Still Weak in January
The latest housing market reports were mixed, confirming that the housing market is edging closer to a sustained recovery but that it has not yet begun. Brief surges have occurred several times in the last two years but none have been sustained. Housing starts and existing home sales rose strongly in January while housing permits and new sales both declined significantly. Home prices also fell in January. Price data is less reliable. At best, prices have stabilized. At worst, the national home price index is still slipping slowly although prices are recovering in some regions.
The January gain in existing home sales was driven by foreclosure sales, cash sales (many of these to speculators) and purchases by first time home buyers. Purchases by current homeowners with standard mortgages from owners without financial distress remain an exceptionally small share of the market. This is usually the core of the housing market. The return of these buyers is getting closer with continuing gains in jobs and the recent jump in the consumer confidence index from 50 to 70. Monthly job gains are forecast to average over 150,000 in 2011. The improving economic environment for housing has already boosted permits and starts for apartments but will take a few months longer to reach the single family market. Tens of millions of households are locked out of the single family market due to loss of housing and other equity, credit standing and income. Each of these restraints are gradually easing but will not disappear for several years. The underwater mortgage problem will likely take even longer to disappear.
The home remodeling market showed signs of improvement late in 2010. While this market is very ill-measured, the improvement is persistent so it is real and sustainable. The remodeling tracking indexes from the National Association of homebuilders and the Harvard Joint Center on Housing both show late 2010 gains which are matched by building supply/home center retail sales gains.
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