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Friday, October 19, 2012

Wells Fargo's Economic Commentary - Housing

Residential Construction Boosting Economic Growth
Housing seems to be firming up, particularly the residential
construction sector. Not only did September housing starts jump
to the fastest pace since 2008, but building permits also surged
11.6 percent, the largest monthly jump since the expiration of the
homebuyer credit in 2010. We expect improvement in housing to
underpin economic growth in 2013.

New Home Sales • Wednesday
New home sales pulled back in August, declining 0.3 percent to a
373,000-unit pace for the month after a sharp 3.6 percent rise in
July. The decline was concentrated in the South, with the other
major regions all posting increases. Even with the pullback in
August, new home sales are still up 27.7 percent over last year. The
inventory of new homes remains very depressed at 4.5 months’
supply. The other big news from the August report was an
11.2 percent jump in median new home prices for the month. We
expect September new home sales to bounce back in September,
rising 3.5 percent to a 386,000-unit pace. The stabilization and
modest appreciation in existing home prices is helping to narrow
the price spread between new and existing homes. As a result,
builder confidence continues to rise, indicating a gradual pace of
firming in the new home market.

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