Analyzing Key Elements of the Housing Market Reveals Improvements

Recent improvements in the housing sector, as indicated by rising construction starts and falling foreclosures, have acknowledged that the possibility of a balanced market is no longer a foregone conclusion. March witnessed the housing market continue to recover, posting numbers that suggest a return to normalcy. Trulia’s Housing Barometer has subsequently taken into consideration three key factors that indicate the market is inching closer to “normal.”

Taking into consideration three fundamental principals (construction starts, existing home sales, and delinquency/foreclosure rates), Trulia’s Housing Barometer provides insight into how current conditions compare to those at the depth of the housing crisis.

March’s latest evaluation, regarding the parameters of this Housing Barometer, shows the housing market resting at 56 percent of its normalcy rating, up from 43 percent from six months ago. In determining these rates, Trulia examined the following housing market indicators:

  • Construction starts: With housing starts reaching 1,036,000 (seasonally adjusted annualized rate), figures reached a new post-bubble high. The number indicates a seven percent increase over February and a 47 percent increase from the previous year. Trends indicate that construction starts are now 55 percent of the way back to the normal level of 1.5 million.
  • Existing home sales: Sales fell 0.6 percent in march, resulting in a seasonally adjusted annualized rate of 4.92 million homes. However, that number reflects a ten percent increase over this time last year.
  • Delinquency/foreclosure rates: Continuing with recent trends, the share of mortgages in delinquency or foreclosure dropped to 9.96 percent in March. The combined delinquency/foreclosure rate is now 48 percent back to normal, marking its lowest level since October 2008.

By averaging these key elements of the housing sector, Trulia’s Housing Barometer suggests that we are currently 56 percent of the way back to normal. This marks an improvement of two percent from February and 13 percent from six months earlier. As of a year ago, the market was only 33 percent back to normal.

According to Jed Kolko, Trulia’s Chief Economist, improvements indicated by the barometer may be better than they appear. A shift in sales from distressed to conventional and early signs that the supply may soon catch up to the demand should result in relief for potential homebuyers.

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