The housing market continues to make progress as it appears to be rebounding at a steady pace. Several reports issued over the past week reveal that the improvements which began in 2012 have continued through the winter months when housing is normally slow. Current conditions appear to be a positive reflection of the coming months when the busy housing season begins. However, even though housing starts have increased again, builder confidence is down for the third straight month.

In the latest report from the Commerce Department, building starts and permits for future construction rose at the fastest rate in 4 1/2 years during the month of February. During that month, starts for houses and apartments were at a seasonally adjusted annual rate of 917,000 which is an increase from 910,000 in January. Increasing 1%, it is also is the second fastest pace since June of 2008. Single family home construction rose to an annual rate of 618,000 while apartment construction increased to 285,000. Over the past 12 months, overall housing starts have increased a total of 28%. At the same time, building permits increased 4.6% to 946,000 which is also the most since June of 2008. Building permits reflects future construction which is expected to grow in the months ahead.

Although this data reflects a housing market that is gaining strength, builder confidence for newly built single family homes was down for the third consecutive month in March. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) reported that confidence decreased two points to 44. According to NAHB Chairman Rick Judson, "Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots along with rising costs for building materials and labor. At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals." The HMI component measuring current sales conditions fell four points to 47, sales expectations for the next six months increased one point to 51 and expected traffic of prospective buyers rose three points to 35 in March.

In yet another report, the Federal Reserve released data which shows that Americans net equity holdings in their homes has increased by nearly half a trillion dollars during the last three months of 2012. The report indicates that equity has risen by $1.7 trillion since 2011 and is currently around $8.2 trillion, the highest level since the start of the housing crisis. For the year 2012, equity increased $1.2 trillion. According to the data, there is $1 trillion less owed on homes now than in 2008. This decrease in money owed is due to homeowners paying down mortgage balances, refinancing into smaller loans, as well as, taking advantage of low mortgage rates.

For many years, homeowners faced negative equity which, with the help of refinancing incentives, has been turned around. By using the HARP loan program, underwater homeowners who had loans that were sold to Fannie Mae and Freddie Mac prior to June 1, 2009 have been able to refinance to better terms. The FHA streamline refinance has also been available with reduced fees for homeowners with FHA mortgages that were endorsed prior to June 1, 2009. Both special programs were designed to bring back lost equity at a faster pace to homeowners who were underwater. With less homeowners willing to sell due to the lack of equity during this time, low inventory has caused home prices to increase which is bringing back home equity. With the rise of home values, more homeowners will exit negative equity which will make it possible for them to either sell or refinance through traditional means just in time as these special programs sunset at the end of 2013.

Despite builder confidence being down, the overall housing market is gaining strength and is a leading component of the overall economic recovery. The increase is jobs, as well as the decline in unemployment, will put consumers into a better financial position which will hopefully make them better candidates for credit. While the entire system remains fragile, slow improvements that are happening are encouraging for the entire economy.

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