Housing Data Fuels Optimism for Recovery in 2012

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NEW YORK (MainStreet) -- Why was the U.S. stock market taking off this morning – up 182 points within five minutes of trading? One reason – and it’s a big one – is that the housing market received two early Christmas presents this morning.

First up is fresh news from the U.S. Commerce Department that housing starts rose to an 18-month high in November 2011. New unit construction leaped 9.3% to 685,000 – the highest level since April 2010, the federal government reports.

But in a note of heavy caution, economists advise putting the pom-poms away until housing starts reach their normal, healthy levels of about 1.2 million new unit starts per month. That number seems to be light years away, even with the good news from November.

The second positive report out today is the National Association of Home Builders/Wells Fargo Housing Market Index for December, which shows a moderate increase (from an index of 19 to 21 on a month-to-month basis). That’s the third straight month of increasing index numbers for the HMI, and is the index’s highest point since May 2010.

Again, nobody’s popping the champagne corks just yet, but housing market professionals will take good news wherever they can get it these days – and this is definitely one of those days.

“This is the first time that builder confidence has improved for three consecutive months since mid-2009, which signifies a legitimate though slowly emerging upward trend,” said NAHB Chief Economist David Crowe in an official statement. “While large inventories of foreclosed properties continue to plague the most distressed markets and consumer worries about job security and the challenges of selling an existing home remain significant factors, builders are reporting more inquiries and more interest among potential buyers than they have seen in previous months.”

The highest levels of household confidence came from the South, where the HMI index climbed to 25. Only the Northeast slipped at all in the index – dropping one point to 15, the NAHB reports.

The two releases seem to underscore a further jelling of the U.S. economy, where the housing market is front and center as a key marker for the nation’s financial health.

For example, the NAHB reports that each new home built in the U.S. triggers three new jobs and fuels $90,000 in tax receipts. The group also notes that housing usually accounts for 15% of economic growth coming out of a recession, but during the five-year economic downturn, housing has only contributed 4% to U.S. GDP.

New homes are usually priced about 30% higher than existing homes, and that translates into even more money pouring into the economy when new housing starts are up, as they are right now. That’s all positive news for homeowners, housing industry firms, and investors looking to leverage the sector for profit. Those opportunities have been few and far between in the past few years, but maybe – just maybe – 2012 will be a different story.

Positive economic numbers are a great sign of things to come, but we are starting from a pretty low point when you consider these 10 Spooky Facts About the U.S. Economy.

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