Even though last year was tough for the new home industry, there were a few market areas that experienced gains in both median prices and new home sales volumes when compared to 2009.  Our data feature this week, courtesy of Housing IntelligencePro, looks at those areas which recorded at least 1,000 new home closings over the course of 2010, and made positive progress in terms of both volume and median price.  The list is geographically diverse, ranging from the Midwest to the Hawaii.  The supporting reasons are also equally diverse, once again demonstrating that housing markets are inherently local.  We encourage our subscribers and readers to explore the wealth of reports and information available on each of these areas through Housing IntelligencePro or our online reports section on HousingIntelligence.com.

The last week has brought a mixed bag of housing and economic news.  On the housing front, national data releases in the new and existing home markets moved in opposite directions to begin the year, demonstrating both the volatility of the market and the inconsistent nature of many “national” datasets that are based upon sampled information.  On the economic front, data showed that consumer confidence and labor market conditions continue to improve incrementally, but economic growth was slower than previously expected during the fourth quarter. 

Geopolitical tension in the Middle East will be the most important thing to keep an eye on in the near-term.  Uprising in that region has caused oil to surge to roughly $100/barrel this week and may move even higher if trouble persists.  Rising oil prices put inflationary pressure on goods and services worldwide which would quickly impact the pace of global economic recovery.

The Economy
Preliminary estimates for fourth quarter gross domestic product showed the economy growing slower than advance estimates had suggested.  The U.S. economy grew 2.8% during the fourth quarter which is weaker than the 3.2% pace in the advance fourth quarter report.  However, the economy expanded at a faster pace than the 2.6% growth in the previous quarter.  This marks the sixth straight quarter that the U.S. economy has expanded.  Downward revisions to consumer and government spending caused GDP to be revised lower in the preliminary report.

Consumer confidence increased to a reading of 60.6 in January compared to a revised figure of 53.3 last month.  This is the highest the consumer confidence index has been since May 2010.  The consumer confidence index is also higher compared to the same year-ago period when the index stood at 56.5.  The present situation index increased from the previous month to a reading of 31.0 from 24.9 last month.  The expectations index increased to a reading of 80.3 from 72.3 in the previous month. All nine regions across the country posted a monthly increase in consumer confidence.  The number of people surveyed that plan to buy a home within the next 6 months increased to 2.2% from 1.9% while the portion that plans to buy a new home increased to 0.4% from 0.3% last month.

First-time unemployment claims declined by 22,000 to a seasonally-adjusted 391,000 in the week ended February 19th.  Initial jobless claims have been under the 400,000 level in two out of the last three weeks.  Claims have also fallen in three out of the past four weeks.  The continued downward trend in first-time jobless claims further suggests that labor market conditions are improving.

Housing Market
New and existing home sales moved opposite directions to begin the year.  However, both segments continued to experience downward pricing pressure despite improving inventory levels.

New home sales fell 12.6% from the previous month in January to a seasonally-adjusted annual rate of 284,000 units mainly due to a drop in activity in the West region because of the expiration of a tax break for homebuyers at the end of last year.  This is the first monthly decline in new home sales since October.  Home sales for the previous three months were also revised lower by a combined 3,000 units.

Weaker demand pressured new home prices in January.  Median new home prices declined 1.9% from the previous month to $230,600 in January.  New home prices had increased in the previous two months before January’s decline.  New home prices are up 5.7% from this time last year and 10.5% higher than they were this time two years ago.  This marks the third straight month that new home prices have recorded year-over-year gains.  Annual price appreciation for new homes in January is the highest they have been since August.

Lower prices helped push new home affordability slightly higher in January.  The new home affordability ratio increased to 57.0% in January from 55.2% in December.

New home inventory levels continued to decline in January.  New home inventories declined to 189,000 units on a seasonally-adjusted basis.  This is the eighth consecutive month that new home inventory has declined while it has not posted a monthly increase in the past 12 months.

Existing home sales increased 2.7% from the previous month to a seasonally-adjusted annual rate of 5,360,000 units.  This was the third straight month that existing home sales have increased and the highest sales activity has been since May.  Existing home sales are also higher than they were this time last year, up 5.3% from January 2010 when the seasonally-adjusted annual sales rate stood at 5,090,000 units. This is the first month that existing home sales have recorded a year-over-year gain since June 2010.

Stronger sales activity did not positively impact existing home prices last month.  The median price of an existing home fell to $158,800 from a revised December figure of $168,800.  Existing home prices have now declined for seven straight months and are at their lowest levels since March 2002.

The affordability ratio for existing homes in January jumped to a new all-time high due to a drop in median existing home prices.  Affordability based on 30-year fixed mortgage rates increased to 71.1% in January from a reading of 68.3% in December.

Inventory of existing homes declined 5.1% to a preliminary 3,380,000 units from 3,560,000 units in December.  This is the fifth straight month that existing home inventory has declined and the lowest it has been in a year.  However, January’s inventory level is still 3.1% higher than the 3,277,000 units of inventory on the market during the same year-ago period.  Due to the increase in sales activity, months of inventory improved to 7.6 months in January compared to 8.2 months in December.  Months of inventory have now declined for six straight months since reaching all-time record highs in July.  This is the lowest months of existing home inventory has been since December 2009.

National average mortgage rates declined from the previous week to 4.95% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on February 24th.  This is the second straight week that mortgage rates have declined.

In the week ending February 18th, the MBA’s seasonally-adjusted purchase index increased 5.14% from the previous week but was down 6.45 % compared to the same time last year.  Lower mortgage rates this past week helped boost purchase and refinance activity.

For market-level data and analysis please visit our website at http://www.hwmarketintelligence.com.  For more detailed information on the indicators discussed in this key indicator alert, please visit the following links: