Residential construction improves, but the market is fragile

Today’s New Residential Construction Report showed that in December, both single family permits and starts increased from November with permits continuing to show tepid results when compared on a year-over-year basis while starts improved notably over the same period.

Single family housing permits, the most leading of indicators, increased 1.8% from last month to 444K single family units (SAAR), but declined 0.22% below the level seen in December 2010 and remaining an astonishing 75.31% below the peak in September 2005.

Single family housing starts increased 4.44% to 470K units (SAAR), and climbed 11.64% above the level seen in December 2010 but remaining a stunning 74.22% below the peak set in early 2006.

With the substantial headwinds of elevated unemployment, epic levels of foreclosure and delinquency, mounting bankruptcies, contracting consumer credit, and falling real wages, an overhang of inventory and still falling home prices, the environment for “organic” home sales remains weak and likely very fragile.