Gut Feelings and Graphs Point to Market Improvement

The evidence is beginning to mount that the housing market has stabilized and is improving. While 2011 was the worst year for new single-family construction since World War II, a ray of sunshine erupted in the last quarter that is giving the industry hope that the market has started a climb out of the depths of depression.

There is concrete evidence of improvement in the fourth quarter sales orders reports from the 12 public home builders who have filed their numbers. Every one reported better sales in their fourth quarter. The numbers varied from a barely improved 0.8% from M.D.C. Holdings to a whopping 41.8% for Standard Pacific Homes, but they were all in the positive range.

The Census reported single-family starts were up to 470,000 in December, the highest number for all of 2011 and since the tax-credit’s temporary boost. “With the federal home buyer tax credit out of the way, we believe demand has stabilized and is finally painting a truer picture of conditions,” said Adam Rudiger, an analyst with Wells Fargo, in the bank’s “The Construction Paper.”

And builders are showing some more optimism. The NAHB/Wells Fargo Housing Market Index, which tracks home builder sentiment, has risen sharply since September, from a 14 to a 22. Though granted that’s still low, with the majority of builders being still soured on the market, it’s moving quickly in the right direction.

“The last time this indicator showed a similar correction was in the Spring of 2010 when actual activity improved due to the federal home buyer tax credit, suggesting that it can be a reliable indicator of field conditions,” wrote Rudiger.

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