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By Jason Stipp | 12-21-2011 11:00 AM

Housing Mounts a Comeback?

Homebuilder sentiment, start and permit trends, and consumer behavior suggest a turn for the long-suffering housing market, says Morningstar's Bob Johnson.

Please tune in to on Tuesday, Dec. 27, for Bob Johnson's quarterly outlook for the economy.

Jason Stipp: I am Jason Stipp for Morningstar. We got a bit of housing data this week, and some of it actually looked pretty good, but is this trend sustainable? Here with me to offer his insights on housing is Morningstar's Bob Johnson, director of economic analysis. Thanks for joining me, Bob.

Bob Johnson: Great to be here.

Stipp: Three pieces of housing data this week. The first one is the homebuilder sentiment number. Can you tell me about that what that number said and how it's changed recently?

Johnson: Yes. The homebuilder sentiment, they do just what it sounds like. They go out and ask people that actually build homes, how are you seeing activity? And they generally base it on the people who are walking into their showrooms or asking for bids or so forth. And that number has typically been around, when the markets are really hot, at 50, and that's probably as good as it gets. In the recession it probably got as low as 11. And it bounced around in low teens for many, many months, and now at least the last three months it has begun to take off into the high teens, and now this month we actually hit 21 on that ratio.

So, we've had a 17, 19, 21 type of progression. So, clearly there is better sentiment on the part of homebuilders and I'd expect that to show up in activity in home construction eventually.

Stipp: So, definitely a positive trend in that sentiment, but still compared to a normal level, still a lot of room to go, which isn't necessarily a negative thing. It's not like we are peaking out or anywhere close to that.

The second piece of data we've got is housing starts data. Can you talk about what was behind the starts data, and did you think it was a good number?

Johnson: Yes. We got 685,000 home starts, and we've kind of been really stuck in that 500,000 to 600,000 level for some time, and in the last few months, we've broken out over that 700,000 mark--it's at 685,000 this month. So, that's a much better number than it has been. We got as low as just under 500,000. Obviously, in boom times, we were at about 1.5 million or 2 million units. So clearly to be ... close to 700,000 is a lot better than 500,000, but not near, again, the 1.5 million or so we might have had at the top.

Stipp: There are some interesting trends in the starts data and the kind of buildings that helped to make up that number. How did it break down? What kinds of starts are happening?

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