One way to look at the whole picture in housing is by comparing current trends in the new residential property construction market with the home sales, which according to October data indicate a healthier market than it looks at first glance.
In October, new privately owned housing units authorized by building permits increased on a month-to-month and year-over-year basis indicating the housing market is recovering, according to joint data from the Department of Housing and Urban Development and the Census Bureau.
Residential construction permits increased at a seasonally adjusted annual rate of 1,034,000, up 6.2% compared to September and almost 14% higher than in October 2012.
Authorizations for buildings with five units or more were at 387,000 in October, increasing at a slower rate than single-family authorizations, which were at 620,000 and 0.8% higher than the 615,000 reported in September.
Both agencies warned, however, that month-to-month changes in seasonally adjusted statistics often show irregular movements, so it may take two months to establish an underlying trend for building permit authorizations, four months for total starts, and six months for total completions.
Data on housing units started and completed in September, October, and November 2013 will be released on Dec. 18.
Despite concerns about the recovery of the housing market and whether it is getting closer to a healthier new construction, new and existing home sales ratio, at least one market insider is optimistic about the current data.
As new construction permits continued to increase in October, the total existing home sales fell 3.2% and single-family home sales fell 4.1%, according to the National Association of Realtors.
The decline however is not necessarily an indicator of more bad news to come, says Don Frommeyer, president of the Association of Mortgage Professionals.
“The housing numbers have fallen for the second straight month and were lower than predicted by economists. But we have to take into account the low inventory, which is driving housing prices up and may be deterring some potential buyers,” he says.
Despite the lower sales numbers, he adds, “a housing reversal is not on the immediate horizon.”
He argues that overall, both the existing home sales and single-family home sales, remain at 5% to 6% higher than in 2012. Another supportive argument, in his view, is the expectation to see Janet Yellen as the new Federal Reserve’s chairman who “will keep mortgage rates low.”
