Each month Trulia's Housing Barometer charts how quickly the housing market is moving back to "normal." We summarize three key housing market indicators: construction starts (Census), existing-home sales (NAR) and the delinquency-plus-foreclosure rate (LPS First Look). For each indicator, we compare this month's data to (1) how bad the numbers got at their worst and (2) their pre-bubble "normal" levels.
All three indicators took a step backward in May 2012:
• Construction starts slid back for the month, but up for the year. Starts dropped from an upwardly revised 744,000 in April to 708,000 in May, a 4.8 percent month-over-month decline. But starts are up 28.5 percent year over year. Still, construction has a long way to go: starts are just 23 percent of the way back to normal.
• Existing home sales also decreased. Dropping from 4.62 million in April to 4.55 million in May, home sales are not quite halfway back (at 45 percent) to their normal level from their worst point during the bust.
• The delinquency-plus-foreclosure rate ticked upward. (Remember, on this measure, lower is better.) In May, 11.32 percent of mortgages were delinquent or in foreclosure, inching up from 11.26 percent in April and 11.23 percent in March, though down from 12.07 percent a year ago. The delinquency-plus-foreclosure rate is 36 percent of the way back to normal, ahead of starts but behind sales.
Averaging these three back-to-normal percentages together, the market is now 35 percent of the way back to normal, compared with just 19 percent back to normal a year ago.
The housing market recovery has hit a plateau, remaining in the 33 to 37 percent range since January after making several jumps in the second half of 2011.
Insights on May data from Trulia chief economist Jed Kolko:
Last month we took a small step back. The concerns about both the U.S. job market and the eurozone crisis should hurt confidence in the housing market. We're at a point of increasing uncertainty, and some buyers may decide to hold back a bit. At the same time the decline in sales ... was more about supply tightening than about demand weakening. Inventory is down more than 20 percent year-over-year. And with fewer homes on the market, there are fewer sales.
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