Fed-Fueled Housing Recovery Loses Some Steam
The United States Census Bureau and the Department of Housing and Urban Development released residential construction statistics for November, providing some more evidence of a seasonal slowdown in a generally healthy housing recovery.
The good news is that authorizations for privately-owned housing units edged up. The seasonally-adjusted rate in November was 899,000, a 3.6 percent month-over-month increase, and a 26.8 percent year-over-year increase. Single-family authorizations grew just 0.2 percent month over month, to a rate of 565,000.
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The less-than-good news is that privately owned housing starts in November dropped 3 percent month over month to a seasonally-adjusted annual rate of 861,000, but still grew 21.6 percent year over year. Single-family housing starts dropped 4.1 percent to 565,000 for the month. Once again, this is in line with the general story of strong year-over-year gains being weighed down by a decline in month-over-month growth as the market enters a typically slow selling season…
At the end of November, a battery of positive housing data was released: housing starts hit a four-year high, the NAHB/Wells Fargo Housing Market Index grew five points, the National Association of Realtors indicated that total existing-home sales grew 10.9 percent year over year, and the S&P/Case-Shiller Home Prices U.S. national composite grew 3.6 percent year over year for the third-quarter.
However, October single-family home sales came in weaker than expected. Tom Porcelli, chief U.S. economist at RBC Capital Markets, said “While housing has bottomed and it’s clearly moving in the right direction, we just don’t know how much momentum it’s going to be able to gather in an environment where the labor backdrop, whether defined by job growth or wages, is itself not gathering much momentum,” according to Bloomberg.
This recovery has been stifled by economic headwinds but buoyed by the Federal Reserve’s stimulus programs. Between quantitative easing round three and the soon-to-expire Operation Twist, mortgage rates have been intentionally pushed down to historic lows. According to Freddie Mac, the 30-year fixed-rate for November dropped to 3.35 percent, down three basis points month over month and 64 basis points year over year.
The 2013 prospects for the housing market look strong if the Fed’s stimulus program can keep moving rates lower. Of course, there are concerns that the fiscal cliff would complicate a recovery, but hopes are increasingly high that policymakers will be able to dodge disaster.