Though much has been said about the sustainable recovery that is getting entrenched in the U.S. economy, there is no denying of the fact that the recovery has been painfully slow. The fits and starts recovery could be blamed on the unsteady take off in consumer spending, primarily due to the destruction of household wealth associated with the drop in home prices. The housing boom seen between 2001 and 2005 has resulted in bloated inventory levels, giving very little incentive to build. Additionally, the government is going about a spending freeze, that is stifling employment growth and income gains.
The U.S. economy is set to expand at a below-par rate of 2.3 percent in 2012, according to estimates by State Street Advisors. The firm expects the improvement to continue into 2013, although cautioning that a fiscal squeeze may slow it down further.
With the housing market remaining in the eye of the storm, any information on how the recovery in this sector is panning out will render more clarity on the economic trajectory. Last Friday, a Commerce Department report showed that new home sales unexpectedly fell for the second month in February, declining by 1.6 percent to a seasonally adjusted annual rate of 313,000. This represents the lowest level since October.
Inventories measured in terms of months of supply rose to 5.8 months in February from 5.7 months in January. That said, the median sales price of a new home rose 8.3 percent month-over-month to $233,700.
The National Association of Realtors reported that U.S. existing home sales fell 0.9 percent month-over-month to 4.59 million units. Meanwhile, the previous month's reading was upwardly revised by 1.3 percent. Single-family home sales fell 1 percent, while condominium sales remained unchanged. The median price of an existing home rose 0.3 percent year-over-year to $156,600.
Also, U.S. housing starts fell by 1.1 percent month-over-month to 698,000 in February. However, the negativity was offset by an upward revision to the previous month's starts to 706,000. A 9.9 percent drop in single-family starts more than offset a 26.2 percent increase in multi-family starts. At the same time, building permits jumped 5.1 percent to 717,000, the highest level since October 2008.
Meanwhile, the National Association of Home Builders reported that its housing market index remained flat at 28 in March following 5 straight months of gains. The index is still at its highest level since June 2007. The present conditions index fell 1 point, while the sales expectations index rose 2 points and the index measuring prospective buyer traffic remained unchanged at 22.
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