NAHB: Growing Optimism for Housing Rings in the New Year

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.