It’s been said that, if you talk to three economists, you will get no less than four different and equally plausible explanations for why the economy is the way it is. This same principle could be applied to recent observations about the nation’s housing market. By various accounts, the housing market appears to be steadying itself after several years of turmoil. There are some conflicting indicators, but the overall picture looks good.
One of the best indicators of the housing market’s health is price; by the most recent measures, the trend is heading upward. According to the U.S. Commerce Department, the median price of new homes increased to $248,900 in December 2012. That is a 1.3 percent increase from the month before and a 9.6 increase from December 2011.
Price appreciation reflects rising demand and sales, both of which are also positive signs. The Commerce Department reports sales of new homes increased nearly 20 percent from 2011 to 2012. For all of 2012, 367,000 new homes were sold, the first annual gain in seven years.
Sales and prices also feed construction activity. According to the McGraw-Hill Cos., residential building starts increased 6 percent in December 2012. Breaking down that market sector even further, single-family housing starts grew by 3 percent, while multifamily housing starts gained 15 percent.
Similarly, the Commerce Department reports that housing construction outlays rose 0.9 percent in December 2012, the highest level since August 2009.
According to the National Association of Realtors (NAR), there is some gray to this silver cloud. The trade association for real estate professionals reports its pending home sales index slipped 4.4 percent in December, signaling a loss of momentum in contract signings. On the other hand, NAR explains this is due more to the lack of supply than to the lack of demand.