Trulia Housing Barometer: Housing Market 52% Back to Normal

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. In December 2012, construction starts jumped dramatically, while home sales and the delinquency-plus-foreclosure rate remained near their strong November levels:

Construction starts leaped to a 54-month high in December. Starts were at a 954,000 annualized rate, up 12% month-over-month and up 37% year-over-year. That's the highest level since June 2008. Looking at all of 2012, starts were up 28% compared with 2011, led by construction in Texas and the Carolinas and by a rebound in multi-unit building construction. Construction starts are now 47% of the way back to normal.

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Existing home sales slipped slightly in December. Sales dropped 1% to 4.94 million -- still the second-highest level since November 2009. That puts sales 68% back to normal. Year-over-year, sales were up 13%. The better news is that "distressed" sales (foreclosures and short sales) represent a declining share of overall sales. Excluding distressed sales, "conventional" home sales were up 26% year-over-year in December.

The delinquency-plus-foreclosure rate held steady. In December, 10.61% of mortgages were delinquent or in foreclosure, down a hair from 10.63% in November. The combined delinquency-plus-foreclosure rate is at its lowest level in four years and is 41% back to normal.

Averaging these three back-to-normal percentages together, the housing market is now 52% of the way back to normal, compared with 27% in December 2011. In just the past three months, Trulia's Housing Barometer has jumped 11 points, from 41% in September 2012 to 52% in December 2012. However, the recovery is uneven: In some of the healthiest markets, such as Houston, San Francisco, and Raleigh, N.C., construction is above normal levels and there are few foreclosures left to come. At the same time, in Miami, Chicago, and Riverside-San Bernardino, Calif., construction remains far below normal and there are many foreclosures in the pipeline; in those markets, the recovery is still an uphill climb.

Jed Kolko is the chief economist for online listings site Trulia. This article originally appeared on the Trulia Trends blog.