|Housing Starts surged by 12.1% in December to 954,000 units on an annualized basis. This was above expectations and the highest level since June 2008. Building Permits, a sign of future construction, also increased, coming in slightly higher than the November reading.
In addition, research firm CoreLogic reported that home prices rose by 7.4% in the year ended in November. This figure, which includes the sales of distressed properties, was the largest year-over-year increase since 2006 and it has been positive for nine straight months. Also, the Obama Administration’s December Housing Report showed that home prices had solid annual gains for the year ended in October, with the Federal Housing Finance Agency (FHFA) and Case-Shiller housing price indices up 5.6% percent and 4.3%, respectively, from one year ago.
It’s also important to note that RealtyTrac’s year-end 2012 foreclosure report showed that foreclosure activity increased in 25 states. However, median home prices also increased in 25 states, which pulled 1.6 million homeowners out of negative equity in 2012.
So what’s the takeaway? Goldman Sachs has reported that the fundamentals are pointing towards larger gains for housing prices in the next couple of years. And with home loan rates remaining near record lows, great opportunities are available.
As always, one thing that’s important to monitor is inflation. Since inflation reduces the value of fixed investments, inflation is considered the arch enemy of Bonds–and, therefore, of home loan rates, which are tied to Mortgage Bonds. However, last week’s wholesale-measuring Producer Price Index and the Consumer Price Index showed that inflation remains tame, meaning inflation is not a factor at this time.
The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain near historic lows. Let me know if I can answer any questions at all for you or your clients.