Late last year, I wondered if the housing market was finally in a recovery mode. There was a modest case for thinking positively then, and there's been encouraging news so far in 2012. Will it last? This week's scheduled updates on several housing measures may provide an answer.
Later today the March update for the NAHB Housing Market is scheduled for release, followed tomorrow with February data on housing starts and building permits, existing home sales on Wednesday, and new home sales on Friday. In all four cases, the consensus forecast anticipates mild improvement, according to Econoday via Barrons.com.
“Our view is that housing bottomed out last year,” says Barclays Capital economist Michael Gapen. “It’s no longer a drag on the recovery.”
There's a fair amount of anecdotal support for expecting that housing is on the mend. For instance, AP reports:
Through the housing crisis, the challenges of big regional and national homebuilders such as Beazer Homes USA Inc. and Toll Brothers Inc. were widely broadcast. But the devastation in the industry also was acute for many private homebuilders and other small businesses that are part of the housing industry. Ruma is one of many smaller homebuilders now seeing early signs that the housing industry is recovering.
"It's very encouraging to see traffic coming out," Ruma says. Between the houses that the central Ohio builder signed contracts on in the second half of 2011 and the homes it expects to sell between now and July, he estimates that the company will have 21 closings this year. That would be Virginia Homes' best performance since 2009 when it sold 12 homes. The company sold just six in 2010 and seven last year.
Meanwhile, CNN notes that the residential market's looking firmer in Phoenix.
There are other isolated reports of positive change, but the real question is how is the nation faring overall? Here too there's mildly good news. New housing starts (blue line in the chart below), for instance, are near their highest levels since the recession was technically over as of mid-2009. Newly issued building permits (red line), a sign of future activity in housing, is doing even better, reaching the highest level in January since 2008.
Re/Max tells us too that things are looking up:
With a median price of $171,881, prices in the 53 cities surveyed by the RE/MAX National Housing Report rose by 1.1% over February 2011. Home sales were even higher, up 8.7% from one year ago. With a positive sales trend of 8 straight months above the previous year, it's looking like 2012 will witness a very strong home-selling season. As a result of reduced foreclosure activity, inventory continued a downward trend for the 20th straight month, 22.4% lower than the housing inventory in February 2011. Consumer sentiment appears to be rising, and record low mortgage rates coupled with favorable home prices are attracting homebuyers and investors who don't want to miss a historic opportunity.
"All the data is pointing to a very active spring and summer selling season this year, which is great news for a recovering housing market," said Margaret Kelly, CEO of RE/MAX, LLC. "As sales numbers have trended higher for several months, we have been anticipating a turnaround in home prices, and it looks like it's finally starting."
If the housing numbers set for release in the week ahead bring more signs of improvement, the economic outlook generally will brighten. Housing, after all, has been a drag on macro conditions for several years. If this weight is truly lifting, even only slightly, the change will be more than trivial. Housing as a share of the U.S. economy may be as high as 18%, according to the National Association of Home Builders.
No one thinks that housing is set to boom any time soon, of course. Indeed, quite a bit of the positive news in recent months is simply a rebound from what has been a long and painful correction. The hole is still quite deep, but maybe we're climbing out of it. If this sizable portion of the economy can transition to a mildly net contributor for growth, a continued run of positive momentum may be in the cards overall. In fact, it's reasonable to wonder if the broader economic recovery can survive if the housing market doesn't show ongoing improvement. Any way you slice it, there's a lot riding on the housing numbers this week.