Fed-Fueled Housing Recovery Loses Some Steam

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At the end of November, a battery of positive housing data was released: housing starts hit a four-year high, the NAHB/Wells Fargo Housing Market Index grew five points, the National Association of Realtors indicated that total existing-home sales grew 10.9 percent year over year, and the S&P/Case-Shiller Home Prices U.S. national composite grew 3.6 percent year over year for the third-quarter.

However, October single-family home sales came in weaker than expected. Tom Porcelli, chief U.S. economist at RBC Capital Markets, said “While housing has bottomed and it’s clearly moving in the right direction, we just don’t know how much momentum it’s going to be able to gather in an environment where the labor backdrop, whether defined by job growth or wages, is itself not gathering much momentum,” according to Bloomberg. 

This recovery has been stifled by economic headwinds but buoyed by the Federal Reserve’s stimulus programs. Between quantitative easing round three and the soon-to-expire Operation Twist, mortgage rates have been intentionally pushed down to historic lows. According to Freddie Mac, the 30-year fixed-rate for November dropped to 3.35 percent, down three basis points month over month and 64 basis points year over year.

The 2013 prospects for the housing market look strong if the Fed’s stimulus program can keep moving rates lower. Of course, there are concerns that the fiscal cliff would complicate a recovery, but hopes are increasingly high that policymakers will be able to dodge disaster.

Don’t Miss: Homebuilders Continue to Raise Confidence Levels.

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