Tuesday, February 28, 2012

US Housing

Is the housing industry really recovering, or is it just the weather? The mild winter weather undoubtedly boosted the recent batch of housing indicators. However, record low mortgage rates and an improving labor market are also providing some lift to new and existing home sales, and to home improvement outlays as well. The pending home sales index, which reflects demand for existing homes, rose in January, and so did actual sales. However, some of the strength in the index was concentrated in the Northeast, where the winter has been mild. Then again, the index was also strong in the South, where the winters are always mild.

Existing home sales increased 4.3% in January to 4.57 million (saar)--the highest level since May 2010. The increase was the third in the past four months, with December’s pace revised down a bit. Sales to first-time homebuyers were up to 33% of the total in January from 31% in December. Investors purchased 23% of homes in January, up from 21% in December. Investors are more likely to have enough extra cash after they purchase a home to renovate it. That may explain why the S&P 500 Home Improvement Retail stock price index is up 58% since August 10, 2011. However, the recent spike in gasoline prices might cause some homeowners to put their renovation plans on hold. (More for subscribers.)

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