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December housing data sets a pretty positive tone for the housing market in 2015. Single-family building permits, housing starts and new home sales all reached their highest levels since the Great Recession started. An improving labor market and historically low mortgage rates should help ignite the next leg of the housing recovery this year. New and existing home sales in December were the strongest they have been since 2007 and 2006, respectively. This is a positive sign since activity is usually lackluster this time of year. If this is any indication of where the housing market is heading in 2015, then we should be in for a busy year.

New Home Sales Jumped To End 2014

New home sales rebounded in December while prices and supply also increased. New home sales jumped 11.6% from the previous month to a seasonally adjusted annual rate of 481,000 units. This is the strongest month of new home sales activity since June 2008. It is also the strongest December for new home sales since 2007. A 54% spike in new home sales in the Northeast was the primary driver behind December's gains while sales in the South and West regions also increased. New home sales in the Midwest fell almost 12% last month. Median new home prices rose to an all-time nominal high in December as increased demand, higher material costs and labor shortages all helped put upward pressure on prices. Many builders ran special incentives at the end of last year to boost demand during a time that is typically slower for housing. This may have contributed to the rise in sales for December. New home sales had their strongest year of activity since 2008 last year but are still only one-third of what they were at their peak in 2005.

Resales in 2014 Decline 

Although existing home sales closed out the year on a positive note with an increase in December, they fell for the first time since 2010 for the year as a whole.  Existing home sales rose 2.4% from last month to a seasonally adjusted annual rate of 5.04 million units in December. Resales are up 3.5% from last December which marks the third straight month that they have posted an annual gain and a positive sign that 2015 will bring more activity than 2014 did. For the entire year of 2014, existing home sales declined 3.1% from 2013 levels to 4.93 million units. Lower mortgage rates and strong job growth led to the strongest December for existing home sales since 2006. The single-family segment has been holding up better than condos and co-ops over the past couple of months. Sales of existing single-family homes increased 3.5% from the previous month to 4.47 million units while sales of existing condos and co-ops fell 5.0% to 570,000 units. 

Lower Prices At The Pump Boosts Consumer Confidence

Consumer confidence jumped to its highest levels in over seven years in January.  The consumer confidence index rose to a reading of 102.9 in January from an upwardly revised December figure of 93.1. This is the second straight month that consumer confidence has increased and the highest the index has been since August 2007. Falling oil prices, a strong labor market and historically low mortgage rates continue to fuel consumer confidence and are all very positive for the U.S. economy moving forward. The number of people surveyed that plan to buy a home within the next six months decreased to 4.8% from 4.9% in December. The number of those respondents that plan to buy a new home remained unchanged from last month at 0.9%. However, an improving labor market and increased affordability due to stable prices and historically low mortgage rates should drive buyer demand in the early part of 2015.

 

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