Existing home sales surge in December

We just got the existing home sales data for December. Here's what the figures showed ...

* Sales surged 12.3% to a seasonally adjusted annual rate of 5.28 million from 4.7 million units in November. That was far better than the 4.87 million SAAR economists were expecting, and it leaves home sales at the highest rate since May.

* By property type, sales jumped 11.8% in the single-family market and 16.4% in the condo and coop arena. By region, sales gained at a double digit rate across the board. They gained 10.1% in the South, 11% in the Midwest and 13% in the Northeast, and 16.7% in the West.

* The number of homes for sale fell 4.2% to 3.56 million from 3.72 million in November. That was up from 3.283 million a year ago, however. But the strength in sales helped pushed the months supply at current sales pace indicator of inventory down to 8.1 from 9.5, the lowest since March. Median home prices dipped 0.8% to $168,800 from $170,200 a month earlier. That was a 1% change from year-ago levels.

The housing market continues to show signs of life, with building permits, confidence, and now sales perking up. Indeed, single-family sales activity shot up at the fastest pace in any month going all the way back to January 1983. The gains were widespread regionally as well, and that helped reduce the backlog of unsold homes somewhat. I credit the improved tone of the labor market, a pick up in buyer confidence, and a budding sense the worst might be over for home pricing.

At the same time, we're still talking about a market with more than three and a half million homes officially for sale. You have quite a bit of "shadow inventory" behind that, and foreclosures continuing to be parcelled out into the market over time. So I don't anticipate we're going to see consistent, large gains like we did last month. It will be more of a gradual improvement in the tenor of the data over the course of 2011.

Housing starts fall, but permits rocket higher in December

We just got housing starts figures for December. Here's what the numbers showed:

* Housing starts dropped 4.3% to a seasonally adjusted annual rate of 529,000 from 553,000 in November. That missed expectations for a reading of 550,000 and was the worst reading since October 2009. But building permit issuance rocketed higher by 16.7% to a 635,000 SAAR from an upwardly revised 544,000 in November. That was the biggest monthly rise in permits going all the way back to June 2008.

* By property type, single family activity slumped 9% while multifamily starts jumped 17.9%. Single family permit issuance rose 5.5% while multifamily permits surged 53.5%. That left permits at their highest level since last March.

* Regionally, starts fell 2.2% in the South, 24.7% in the Northeast and 38.4% in the Midwest. Starts jumped 45.8% in the West. Permits rose in most of the country, gaining 3.3% in the Midwest, 43.9% in the West, and 80.6% in the Northeast. They slumped 7.6% in the South.

Last month didn't look so hot, but the future looks a lot better. That's the takeaway from the latest starts and permits figures. Construction slumped to a one-year low in December, yet builders of apartments, condominiums and houses pulled more permits than in any month since last March. The volatile multifamily market saw a huge surge, while activity in the core single-family market perked up at a more measured pace.

Bottom line: The figures point to continued improvement in housing, driven by increased buyer confidence and a gradual stabilization of the job market. But the recovery is a tepid one -- and will remain so in 2011 due to the overhang of foreclosed property, rising mortgage rates, and a "once burned, twice shy" mentality when it comes to real estate across mainstream America.