The news that rates will stay low will help most every facet of the economy including housing.  News out yesterday that first time claims for unemployment rose unexpectedly in the past week adds fuel to those who believe that the economy is a long way from being cured.

Each of these factors should bolster housing in 2012.   One other factor not accounted for will be the interest of institutional funds in single family “buy-rent-hold” investment pools.  Further positive news could come from the GSE attempts to structure bulk sales to investors of their foreclosed inventories.

Should we want to use the GSE’s to stimulate housing sales (and therefore it is thought the economy) then let’s have Congress and the President work together and announce that this is what they want – and stop this behind the scenes politicking (back stabbing) that is going on now.  Remember that it was several member of Congress that protected the GSE’s from 1995-2007 that drove us to where we are today.  And the main participants in those past efforts are nowhere to be found today.

The annualized rate of the combination of new and existing home sales increased to 5.483 million in December 2011 from 5.285 million in December 2010 and was up from the November 2011 rate of 4.999 million. (The new NAR Existing Home Sales data has been incorporated into the calculations for December and may account for the large jump over November 2011). Average prices of homes sold in December 2011 decreased 7.9 percent from December 2010.

Meanwhile, the 15-year, FRM remained at 3.21%, and the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.85% this week, down from 2.86% last week.

As we have pointed out, unit sales of the combination of new and existing housing have increased in high single to low double digit rates for the last four months (REAL Trends Housing Market Report, 2011).  Yes prices continue to decline.  Yes interest rates remain at record lows.  But an increase in jobs of any kind and an increase in consumer confidence will do more for housing than any other factor.

From RealTrends.com: Existing home sales increased 13.5% in October when compared to a year earlier and would be even higher if contract failures and cancellations plaguing the loan application process could subside, the National Association of Realtors said Monday.

Total existing home sales — including single-family townhomes, condominiums and co-ops — rose to a seasonally adjusted annual rate of 4.97 million units in October, compared to 4.9 million in September and 4.38 million a year earlier.“Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales such as job creation, rising rents and high affordability conditions,” said Lawrence Yun, NAR’s chief economist. “Many people who are attempting to buy homes are thwarted in the process.”

Yun said the rebound in home sales would be more pronounced if it were not for the number of contract failures reported in October. Overall, mortgage application failures driven by appraisal value issues, home inspection problems and employment losses pushed the contract failure rate to 33%, compared to 18% in September and 8% a year earlier.

“Other recent factors include disruption in the National Flood Insurance Program, and lower loan limits for conventional mortgages, which paradoxically force some of the most creditworthy consumers to pay unnecessarily higher interest rates,” Yun said.

The good news, according to NAR, is the fact that the supply of homes is gradually subsiding. In October, the total existing inventory fell 2.2% to 3.33 million housing units, or an eight-month supply.  That is down slightly from an 8.3-month supply in September.

The national median existing home sales price hit $162,500 in October, down 4.7% from a year earlier.

Analysts polled by Econoday expected housing starts to come in at a rate of 605,000 with a range of estimates between 580,000 and 640,000.

In a joint release, the Census Bureau and Department of Housing and Urban Development said single-family starts climbed 3.9% in October to a seasonally adjusted rate of 430,000 units, up from a revised 414,000 for September.

October’s dip comes on the heels of a 15% increase in September and a 10.5% gain in August. Earlier this year, new home construction decreased by 22.5% in February, which was the largest monthly decline since March 1984.

Building permits in October rose 10.9% to an annual rate of 653,000 from a revised 589,000 for the prior month, and were almost 18% higher than 555,000 a year ago.

The number of permits for future housing construction jumped to a seasonally adjusted annual rate of 653,000 last month, up 10.9% from the revised rate of 589,000 in September, the Commerce Department said.That was much higher than expected, with economists surveyed by Briefing.com looking for a 603,000 permit rate.

But until builders actually start building, this big increase in permits may indicate that builders are hedging their bets and may not translate into an actual increase in construction, said Doug Roberts, chief investment strategist for Channel Capital Research.

“Getting a permit and actually beginning to build a house is the difference between getting engaged and getting married,” said Roberts. “What you have is builders thinking the market might be coming back, so they’re getting permits to make sure they are ready to build if it does.”

In fact, the physical construction of new homes ticked slightly lower during the month, the government report showed.

Housing starts, the number of new homes being built, edged down 0.3% to an annual rate of 628,000 units in October, the Commerce Department said. That’s down from a revised 630,000 in September.

“Builders thought they were going to be able to get out there and get some houses done, but then they found that they didn’t necessarily want to make the stone cold commitment and want to put anything in the ground,” Roberts said. “The demand wasn’t there, so they weren’t willing to bet a serious amount of money.”

But economists had expected a much lower annual rate of 604,000 units, according to consensus estimates from Briefing.com.

If the glut of foreclosures starts thinning and demand picks up, the jump in permits could translate into a rise in new construction in coming months.

“But that’s a big ‘if’,” Roberts said.

Still, permits and construction have both increased significantly from a year ago. Housing starts are up 16.5% from the same month a year ago, and building permits are up 17.7%.