Requests for Building Permits Rise
The year is ending with a bang for the housing market, despite some setbacks. The market that once dragged the economy down seems to be the one now breathing some life into it.
In November, building permits, a measure for future construction, rose 3.6 percent to 899,000. That’s the highest level since July 2008. Analysts surveyed by Bloomberg were expecting 875,000. Going into the new year, this is fantastic news for homebuilders, sellers, buyers and the overall economy. Record low mortgages, increasing consumer confidence, and improving employment conditions are all helping push once reluctant buyers into the market.
“We’re headed higher and next year is going to be the best year for housing starts that we’ve seen since 2007,” Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, told Bloomberg. “Housing is coming back.”
But there are still the occasional stumbling blocks. According to the Commerce Department, housing starts dropped 3 percent to 861,000. Frankenstorm Sandy dampened housing starts in the Northeast, where starts dropped 5.2 percent from October to November. Economists are predicting about 40,000 homes destroyed by the storm would likely be rebuilt over the next few years. But that activity is not expected to have an impact on housing numbers nationally.
The western region took a beating with starts falling 19.2 percent, but the South and Midwest recorded gains. Overall, single-family home construction dropped 4.1 percent to a 565,000 pace while apartment building starts fell 1 percent. But, permits for future multi-unit buildings climbed 10.6 percent to a 334,000 annual rate.
In its first ever increase since 2006, home values jumped an estimated 6 percent this year, according to Zillow. That’s a sign of recovery from what some economists are calling the worst downturn since the 1930s.
Compared to last year, home values jumped more than $1.3 trillion to $23.7 trillion, bringing much needed relief for sellers and homeowners. Zillow expects values to continue to rise in 2013.
“The housing market really turned a corner in 2012, as historic affordability and sustained investor interest helped keep demand at a boil,” Stan Humphries, Zillow’s chief economist, said in a statement. “As home values rise, and more homeowners are freed from negative equity, we can expect a continued slow transition to a more normal housing environment.”
Encouraged by job gains, low interest rates and rising home values, buyers who once shied away from the market are again flocking to it in droves. With foreclosures down, a decrease in inventory is also helping tighten the market, thereby improving prices.
In November, existing home sales climbed 5.9 percent to an annual pace of 5.04 million.That’s the highest gain in three years, according to the National Association of Realtors®. Compared to a year ago, the median sale price was up 10 percent at $186,000.
A rise in demand would continue to feed home construction, economic growth and price increases, Michael Widner, an analyst with Stifel Nicolaus & Co., wrote in a note to investors, according to Bloomberg.
Of all the metro areas, Los Angeles made the most gains by adding a whopping $122 billion in home value. In the New York area values rose $11.1 billion. Philadelphia was the only metro that recorded a loss, with values dropping $1.6 billion. Despite the gains, in most major markets, home values are still down about $5.8 trillion from their peak of $29.5 trillion in the third quarter of 2006, Zillow said.
For the eighth straight month, builder confidence made gains in December. According to the National Association of Home Builders, builder confidence rose to 47 from a revised reading of 45 in November. That’s the highest level since the recorded reading of 51 in April 2006.