Housing Recovery is Halfway Back to Normal
Each month, Trulia’s Housing Barometer charts how quickly the housing market is moving back to “normal.” We summarize three key housing market indicators: construction starts (Census), existing home sales (NAR), and the delinquency-plus-foreclosure rate (LPS First Look). For each indicator, we compare this month’s data to (1) how bad the numbers got at their worst and (2) their pre-bubble “normal” levels.
In November 2012, home sales saw strong increases, and the delinquency-and-foreclosure rate held steady — both signs of market improvement. However, new construction starts declined.
Hurricane Sandy appears to have lowered construction (and sales, to a lesser extent) in the Northeast. Average monthly construction starts were 14 percent higher nationally in October and November — the months affected by Sandy — than in the previous four months, but 5 percent lower in the Northeast. Average monthly home sales were 7 percent higher nationally in October and November than in the previous four months, but just 3 percent higher in the Northeast.
Construction starts dipped in November but remain strong. Starts in November were at an 861,000 annualized rate, down 3 percent month-over-month and up 22 percent year-over-year. For the past three months, construction starts have remained solidly above 800,000 — the highest level since September 2008. Nationally, construction starts are 37 percent of the way back to normal.
Existing home sales rose once again in November. After climbing in October, existing home sales rose 6 percent month-over-month to 5.04 million in November–the highest level since November 2009. Sales are 73 percent back to normal. Even better, “distressed” sales (foreclosures and short sales) represent a declining share of overall sales, making way for more “conventional” home sales.
The delinquency-and-foreclosure rate maintained a new post-crisis low. In November, 10.63 percent of mortgages were delinquent or in foreclosure, down a hair from 10.64 percent in October. The combined delinquency-and-foreclosure rate is at its lowest level in four years and is 41 percent back to normal.
Averaging these three back-to-normal percentages together, the housing market is now 51 percent of the way back to normal, compared with 28 percent in November 2011. Trulia’s Housing Barometer has jumped 5 points in each of the last two months. Does halfway back to normal mean the glass is half-full or half-empty? The half-empty view is that our three housing measures hit bottom (on average) in 2009, so it’s taken the market a long time-three years-to get to the halfway mark. But the half-full view is that halfway back to normal is better than anyone — myself included — predicted for 2012 at the start of this year.
By Jed Kolko, Trulia Chief Economist www.realestate.aol.com