Americans are beginning to gain ground against the worst recession in recent history as more and more economic indicators point to recovery. A new study from the Federal Reserve says household net worth in the U.S. soared $2.1 trillion during the last three months of 2010.
Gregory Daco, U.S. senior economist for the research firm IHS Global Insight says household liabilities rose just 0.2 percent during the fourth quarter of 2010 as consumers took on more installment debt but continued to pay down existing mortgages. Outstanding mortgage debt fell by 0.3 percent.
The latest figures are a good sign for the mortgage market as it struggles to get a handle on delinquency numbers in the millions. The increased net worth should translate into stronger household finances and fewer homeowners who are unable to meet their mortgage obligations.
Market analysis from the Mortgage Bankers Association (MBA) does indeed point to a decline in new delinquencies in recent months.
MBA reported last month that the overall delinquency rate for single-family mortgage loans dropped to 8.22 percent at the end of 2010, as the numbers fell in all past-due buckets.
Mortgages only one payment late – 3.25 percent of all outstanding home loans – have now fallen to the pre-recession levels of late 2007, according to MBA.
More Evidence of a Bottom in Housing
According to recently released data, U.S. housing starts have risen 30% from their all-time low in April '09. In addition, building permits increased 38% over the same period. And not surprisingly, the Bloomberg index of home builders' stocks bottomed last July and has since risen over 50%. The prices of home equity-backed securities are rising sharply. If this doesn't add up to a clear picture of a bottoming in the residential construction market, we're not sure what would.
To be sure, this "bottom" has taken almost a year to form, which makes it the longest-drawn-out recession bottom since data began to be recorded in 1968. Also, housing starts in the winter months are full of seasonal adjustment factors which may or may not accurately reflect underlying activity. But an increase of 30% in just under a year is pretty impressive nonetheless, and hard to chalk up to seasonal or weather-related vagaries.
With most signs pointing to an end to the worst housing recession in modern history and a clear beginning to a housing recovery, the widespread angst over the homes remaining to be foreclosed and auctioned off seems overdone. The recovery seems to be for real.
The true test will come now that tax incentives for buying a new home no longer factor in to the market.
Pending Home Sales Showing Improvement
Recent data finds that pending home sales are holding steady over the past couple of months, while indicating that market conditions have improved considerably since the height of the recession.
According to the National Association of Realtors, its pending home sales index increased to 96.6 in December, marking a 1 percent improvement over November's figures. The December figures marked a 10.9 percent year-over-year improvement, indicating that while the market remains shaky, it has gained considerable momentum in the aftermath of the recession.
NAR also noted that sales had fallen by a 16.4 percent margin – with the market fluctuations due largely to buyers trying to take advantage of the federal homebuyers tax credit that was extended at the end of 2009.
The Northeast and western regions of the country have seen the strongest sales growth, with a respective 14.9 and 18.6 percent growth rate.
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