|Housing Sector Finally Gaining Some Momentum|
2011 ended on a positive note with economic activity
continuing to expand at a moderate rate and the housing sector finally gaining
some positive momentum after bouncing along the bottom for most of the year.
Real growth of the gross domestic product was
adjusted down to 1.8% for the third quarter, but it remained an improvement
over growth of 0.4% in the first quarter and 1.3% in the second. Expectations
are that statistics for the fourth quarter will show GDP growth strengthening
further as businesses replenished inventories and the holidays boosted retail
Despite concerns over the sovereign debt crisis in
the Euro zone and slowing growth in emerging markets, particularly China, domestic
conditions have shown improvement and the Federal Open Market Committee decided
at its Dec. 13 meeting to maintain its current course.
After a mid-year slump, employment growth began to
regain some momentum with the addition of 200,000 jobs and a decline in the
unemployment rate to 8.5% in December, down 0.6 percentage points since August.
Employment growth is being supported by a steadily
improving rate of job openings, which remained steady at 2.4% in October. The
hiring rate in the construction sector was at a relatively high level of 5.8%
in October, with construction job openings on pace to exceed total separations
for the first time since 2006.
Largely positive housing news over the past few
months suggests the recovery may finally be underway.
The number of metropolitan areas on the NAHB/First
American Improving Market Index expanded to 76 in January, a net increase of 35,
following similarly solid gains in November and December.
The NAHB/Wells Fargo Housing Market Index of builder
confidence in the single-family market has also made steady gains over the past
three months, rising seven points since September to a level of 21 in December.
With the exception of a reading of 22 at the height of home buyer tax credit sales
in the spring of 2010, the December level was the highest since August 2007.
Despite a dismal year for housing production — which
is likely to prove to be the worst in the 52 years that similar data has been gathered
— there was a solid increase in housing starts and building permits in November.
The gains were led by the multifamily sector, driven
by rising demand for rental housing as recession-nipped household formation rates
begin to show signs of recovery. With rents increasing and rental vacancy rates
falling in recent months, starts in buildings with five or more apartments have
grown strongly, recovering to nearly two-thirds of more normal levels.
production, on the other hand, saw little improvement through 2011 and remains
at roughly one-third of more normal levels.