2013 may be best year for housing since 2007

Housing starts jump 28% in 2012, the government says, but remain well below long-term averages. Apartment construction leads the way. Single-family construction will be strong in 2013.

By Charley Blaine Jan 17, 2013 4:03PM
Home under construction © CorbisHousing starts in December jumped 12.1% from November and reached the highest level since 2008, the government said Thursday.

Analysts said the report signals that the housing recovery has momentum going into 2013. Assuming, of course, that the debt ceiling battle doesn't derail the economy.

The December gains reached a seasonally adjusted 954,000 units, up from November's 851,000 units and nearly 37% from December 2011's 697,000 units.

Starts were helped by mild weather in December and the start of reconstruction on the East Coast after Superstorm Sandy, economists said.

Here are five more things to learn from the Commerce Department report.
  • The United States might see 1 million housing units started in 2013. The last time that happened was in 2007, when starts totaled 1.36 million units. The Commerce Department estimated 780,000 housing units were started in 2012, up 28.1% from 2011. Starts would have to grow about 22% in 2013 to reach 1 million units. It's happened before. In 1983, starts jumped 60% after four straight years of decline.
  • Apartment construction is still powering the recovery. That suggests there's still wariness about buying new homes, particularly in the Northeast and the West. Apartment starts were up 39.5% in 2011. Single-family starts were up 24.4%.
  • Single-family building permits suggest steady growth ahead. Building permits are a more reliable housing measure because they are indications of real intent to build. Single-family permits are probably the best gauge of the state of the single-family housing market. Permits increased 1.8 % to a 578,000 rate. That's the highest since June 2008.
  • Housing should give the economy a boost. Residential investment is on track to rise at close to a 20% annual rate in the fourth quarter of 2012, Jim O'Sullivan, chief economist at High Frequency Economics, wrote clients on Thursday. That could add as much as a half percentage point to U.S. fourth-quarter growth.
  • The housing market is nowhere near a bubble. Starts have averaged about 1,470 million units since 1959. So 2012, while welcome, was still a weak year by historical standards. The 2012 starts are still 47% below that long-term average and 62.3% below the 2008 peak of 2.07 million units.
The report helped stoke a solid stock market rally. The Dow Jones industrials ($INDU) were up 92 points to 13,603 at 2 p.m. ET. The Standard & Poor's 500 Index ($INX) added 9 points to 1,482, and the Nasdaq Composite Index ($COMPX) rose 20 points to 3,137.

Housing stocks were higher on the news, led by PulteGroup (PHM), Lennar (LEN) and Toll Bros. (TOL). The Philadelphia Housing Sector Index ($HGX) added 4 points to 186. The index is up 8.4% this month.

More on Money Now

Tags: Housing
Jan 17, 2013 5:23PM
Fed buying mortgage backed assets=housing bubble
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