Despite Early Slips, Housing Might Be Improving in 2014

February’s housing numbers have come in. The result? Well, suffice it to say that they aren’t going to help nor hinder the U.S. markets, many of which remain at record high levels following a huge surge in the first week of March. Overall, housing starts dropped by 0.2% — that translates to about 907,000 new houses started in February. While the housing markets continue to show improvements over the darkest years of the Great Recession, pundits can’t help but wonder whether or not this is a sign of bad things to come.

An Icy Economy Fitting the Arctic Weather
The housing market isn’t the only sector of the economy that’s taken a beating in the last few months. In the 12 months leading to February, consumer grocery prices jumped 1.1%, though a noticeable decrease in the price of gasoline held the Labor Department’s Consumer Price Index to an overall increase of only 0.1%. In that, the news isn’t that bad, but that shouldn’t be read to mean things are going swimmingly either.

“We saw that the demand for houses was below seasonal averages due to the weather, which created some pent-up demand from buyers,” explains Jeff Thibodeau, Sales Representative with Remax Twin City Realty, Inc. “Now that the weather has improved and the days are longer, we’re seeing buyers rush back towards the market.”

Compounding the issue is the United States’ inflation rates. The Fed has set an inflation target of 2% for the year. We’re nearly a quarter through 2014, and if the first three months of this frosty year are any indication, the States may fall well short of the Fed’s goal. In response to the gray outlook, experts expect the Fed to release another $10 billion reduction to monthly bond purchases, while keeping interest rates at zero percent.

Do The Numbers Negate the Fed’s Earlier Predictions?
The recent numbers fly directly in the face of the Federal Reserve Bank of Philadelphia president Charles I. Plosser’s estimates that the United States economy would make great strides this year. By the end of the year, Plosser stated, unemployment will drop to 6.2%, while the economy will grow by 3.0% overall. At first blush, the housing numbers coupled with stagnant inflation rates don’t paint Plosser’s comments as plausible, but there is a silver lining.

While February’s housing numbers are undoubtedly less than encouraging, permits are showing a healthy spike. Housing permits are used to demonstrate future housing starts. Permits grew by 7.7% last month, with an additional 24.3% of new permits for multi-dwelling units being issued. With permit levels reaching their highest point since October 2013, it seems like calls of our frozen economy being tied to the freezing weather might actually have weight. That being said, only time will tell whether the economy will indeed bloom anew in springtime.

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