It was housing data week. Even though builder confidence was unchanged in March, according to the National Association of Home Builders, we have good reason to expect that the overall improving trend in residential construction will continue. Housing starts in February dipped slightly, by 1.1 percent, to a 698,000 unit annual rate. Housing permits, which provide a forward view on construction activity, increased in February by 5.1 percent to a 717,000 unit annual rate with gains in both single and multi-family permits. This is the strongest monthly permits number since October 2008, and is up 34.3 percent from a year ago. Existing home sales remained weak in February and new home sales were still depressed, but the trends for both look promising. However, lackluster mortgage applications for March suggest that the next data point for home sales will not be a break out. Home prices are slipping less badly, which, at this point in time is a compliment. The Federal Housing Finance Agency said that U.S. house prices were unchanged from December to January. All in all, the basket of residential real estate data is looking less bad, verging on better, suggesting that the housing sector is in transition from a strong drag on overall economic activity, to at least being neutral, if not a small positive. Recently higher mortgages rates, under mild upward pressure after the FOMC’s less dour economic assessment and policy announcement of March 13, may have caught some prospective buyers off guard. It may also serve as a warning that exceptionally low home mortgage rates will not last forever, focusing buyer intent.
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