Housing starts decline. The Census Bureau reported that, at an annual rate, 557,000 new privately-owned homes were started in December 2009, a 4.0 percent decline from November 2009.  The drop is due to a decline in single-family housing starts, which fell 7.0 percent from November to December.  By the end of 2009, an estimated 553,800 housing units were started, well below the 905,500 units started in 2008.  While the oversupply of homes has been reduced from its peak in January of 2009, 14 percent of housing units were still vacant in the third quarter of 2009, which is close to the peak vacancy rate.  However, single-family housing permits, a leading indicator of housing starts, rose by 39,000 in December to 508,000.  The increase in housing permits could suggest that construction firms anticipated an increase in housing demand in response to the extension of the homebuyer tax credit to homes purchased before May 2010.  The homebuyer tax credit was also extended to include current homeowners, who may use the credit to cover fixed costs associated with moving into a new house.  Some analysts believe that the homebuyer tax credit simply accelerated purchases for those who would have purchased a home in the near future, citing the 16.7 percent drop in existing home sales in December from November.  However, the unusually cold and snowy December may also have played a role in the drop of December home sales and housing starts.   

Initial claims for unemployment insurance rise. The Department of Labor reported that the seasonally adjusted number of weekly initial claims for unemployment insurance was 482,000 during the week ending January 16th, up by 36,000 from the previous week. The 4-week moving average of initial claims, a less volatile measure of initial claims for unemployment insurance, also rose after having declined for 18 consecutive weeks (see Chart).  However, the four-week moving average of initial jobless claims has declined at a fairly steady pace since reaching a 28-year high in April 2009.  Consistent with the rising duration of unemployment, 5.6 million persons claimed emergency unemployment compensation (EUC) during the week of January 2nd, an increase of more than 650,000 from the prior week and nearly 3.0 million from the comparable week in 2009.  This increase is largely due to legislation signed in November 2009 that extended EUC for an additional 6 weeks for people living in states with high unemployment rates at least 8.5 percent.

House prices tick up. The Federal Housing Finance Agency reported that its monthly home price index rose 0.7 percent in November. Since falling to 197.84 in April, the FHFA House Price Purchasing Index has regained 1.2 percent. The S&P/Case-Shiller Composite 20 Home Price Index, which measures housing prices in 20 major metropolitan markets, also rose slightly. The S&P/Case-Shiller Home Price Index is generally considered a more reliable source of the state of the housing market because it includes houses purchased with subprime mortgages and jumbo mortgages in addition to the FHFA’s list of houses financed with conventional mortgages.