Housing Picture is Better Than We Know

The Mortgage Corner

There have been some developments that tell us housing prices could stabilize and new home construction pick up in the New Year. This is even thought the continuing fall in housing prices has stymied any growth prospects, as well as the foreclosure mess that has kept banks from loosening their credit standards enough to encourage more home buying.

For instance, a recent press release from the National Association of Homebuilders said the number of improving housing markets continued to expand for a third consecutive month in November, rising from 23 to 30 on the latest National Association of Home Builders/First American Improving Markets Index (IMI).

And single-family housing starts rose 3.9 percent to a seasonally adjusted annual rate of 430,000 units in October, according to the U.S. Commerce Department. This is while single-family permits also posted a measurable gain of 5.1 percent to 434,000 units in the latest report, which is their fastest pace since December of 2010.

Sales of new single-family houses in October 2011 also rose slightly, to a seasonally adjusted annual rate of 307,000 ... This is 1.3 percent above the revised September rate of 303,000 and is 8.9 percent above the October 2010 estimate of 282,000.

The flood of distressed sales has kept existing home sales elevated, and depressed new home sales since builders can't compete with the low prices of all the foreclosed properties. And so we have the ‘distressing gap’ between new and existing-home sales, according to Calculated Risk.

Low prices and low interest rates appear to be creating traction in the housing market with pending home sales the latest report to show strength. The pending home index, which is a measure of contract signings for sales of existing homes, jumped 10.4 percent in October to 93.3. This is after pending home sales index fell 4.6 percent in September with declines split about evenly across regions. September's decline was unusually steep, following declines of 1.2 percent in August and 1.3 percent in July.

The gain points to strength in final sales of existing homes for November and December though cancellations, tied to low appraisals that keep buyers from selling their own homes and to restrictions to credit access, have been cutting into the proportion of contracts that make it to closing.

Harlan Green © 2011