There's still no cause for exuberance in the residential construction market, but some signs that the market may be firming up have been rolling in. For example, housing inventory nationwide continues to decline and prices are showing signs of stability, both good signals for a potential increase in construction.
In a report showing an increase of 5.6 percent in existing-home sales in November from October levels, the National Association of Realtors said the total housing inventory at the end of November fell four percent to 3.71 million existing homes available for sale, a 9.5-month supply at the current pace of sales and a decrease from the 10.5-month supply reported in October.
Existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 5.6 percent to a seasonally adjusted annual rate of 4.68 million in November from 4.43 million in October, but are 27.9 percent below the cyclical peak of 6.49 million in November 2009 (which was distorted by the initial deadline for the first-time buyer tax credit).
NAR officials were encouraged by the increase, though its size was less than many housing market analysts had expected.
Lawrence Yun, NAR chief economist, is hopeful for 2011. “Continuing gains in home sales are encouraging, and the positive impact of steady job creation will more than trump some negative impact from a modest rise in mortgage interest rates, which remain historically favorable,” he said.
According to Freddie Mac, the national average rate for a 30-year, conventional, fixed-rate mortgage rose to 4.30 percent in November from a record low 4.23 percent in October but still significantly below the 4.88 percent rates seen in November 2009.
“In the short term, mortgage interest rates should hover just above recent record lows, while home prices have generally stabilized following declines from 2007 through 2009,” Yun said. “Although mortgage interest rates have ticked up in recent weeks, overall conditions remain extremely favorable for buyers who can obtain credit.”