Growing Home Market Still Far from Fixed

Sales of new single-family homes joined building permits, construction starts, and median prices of new and existing homes with gains in September. However, while the market is improving, the sub 400,000-unit annual sales rate is only about one quarter of the levels reached during the pre-recession boom.

A variety of housing metrics are showing consecutive months of improvement, indicating a reliably positive direction for the market. Rapid recovery, however, is likely to remain out of reach for the foreseeable future.

Compared to September 2011, the seasonally adjusted annual rate (SAAR) of new home sales increased 27.1 percent in September, and gained 5.7 percent over August 2012.

Despite the improvements, the 389,000-unit SAAR is still just above one-fourth of the peak reached in July 2005.

The inventory of new homes on the market rose 1.4 percent in September, but the quickening sales rate brought the supply of new homes on the market down to 4.5 months at the current pace. The supply is at the lowest since October 2005, and down from 4.7 months in August, indicating a continuing reticence by homebuilders to flood the market with new construction.

U.S. housing markets showing consistent improvement also grew for a third consecutive month in November to a total of 125, according to the National Association of Home Builders/First American Improving Markets Index (IMI).

The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. Notable additions to the November list include San Diego, Calif.; Gainesville, Fla.; Omaha, Neb.; Louisville, Ky.; and Charlotte, N.C.

“The solid increase in the number of improving housing markets this month illustrates the degree to which the housing recovery has gained momentum since we initiated the IMI last year,” NAHB chief economist David Crowe said in a statement. “Compared to the 30 markets that made the list as of November 2011, we now have 125, which is about one-third of all the markets surveyed for this index.”