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Housing Market Leaps 42 Percent Back to Normal

Nationally, sales were at their highest level since May 2010, so home sales are now 61 percent back to normal to from their worst point during the bust. In the West region, however, sharp inventory declines prevented home sales from rising at all year over year.
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Chief Economist, Trulia

Chief Economist, Trulia
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In this Friday, June 1, 2012, photo, Troy Drake hammers a shingle onto the roof of a new house under construction in the Patrick Farms community in Pearl, Miss. Confidence among U.S. builders ticked up in June to a five-year high, an indication that the housing market is slowly improving. (AP Photo/Rogelio V. Solis)
In this Friday, June 1, 2012, photo, Troy Drake hammers a shingle onto the roof of a new house under construction in the Patrick Farms community in Pearl, Miss. Confidence among U.S. builders ticked up in June to a five-year high, an indication that the housing market is slowly improving. (AP Photo/Rogelio V. Solis)

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 August 2012, construction starts held their new high plateau, while home sales rose and the delinquency + foreclosure rate fell:

  • Construction starts held roughly steady. Starts in August were at a 750,000 annualized rate, up 2.3 percent month over month and up 29.1 percent year over year. Construction activity in August was at its second-highest level since October 2008. Nationally, construction starts are 27 percent of the way back to normal.

  • Existing home sales jumped to their highest level in more than two years. Home sales rose 7.8 percent month over month to 4.82 million in August -- a 9.3 percent increase from one year ago. Nationally, sales were at their highest level since May 2010, so home sales are now 61 percent back to normal to from their worst point during the bust. In the West region, however, sharp inventory declines prevented home sales from rising at all year over year.

  • The delinquency + foreclosure rate hit a post-recession low. In August, 10.91 percent of mortgages were delinquent or in foreclosure, down from 11.11 percent in July. The combined delinquency + foreclosure rate is at its lowest level since March 2009 and is 38 percent back to normal.

    • Averaging these three back-to-normal percentages together, the market is now 42 percent of the way back to normal -- up from 34 percent in July and 25 percent in August 2011. Remember, the past year has shown that most steps forward in the housing recovery are followed by some steps back, so the recovery from here on out won't be fast or smooth. Still, the Housing Barometer is at its highest level since the recovery began.

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