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Construction Activity Most Disappointing Aspect of Housing Recovery
Fannie Mae said on Dec. 19th, that the third quarter economy was better than expected with inventory buildups that doubled from the second quarter, the fastest accumulation since the first quarter of 1998. This indicated optimism from business, but if demand doesn't live up to expectations businesses will be forced to cut back on production and quarterly GDP growth will slow.

Fannie Mae's economic forecast for December says some clarity is beginning to emerge in Washington with the government shutdown ended but the company's economists express concern about the possibility of another shutdown in January as well as a battle over the debt ceiling in February. Yesterday's adoption by the Senate of a FY 2014 budget ends the first concern, but the debt ceiling imbroglio remains a threat. The report's prediction that, based on the November jobs report the Federal Reserve would soon start tapering its asset purchases was already borne out by the Fed's announcement to that effect yesterday.

The momentum of the housing market recovery has slowed since the spike in mortgage rates in May. After posting 28 straight months of annual increases, pending home sales were lower than the same month a year earlier in both September and October and October was the straight month of monthly declines. New home sales however rebounded sharply, surging more than 25 percent. Like pending sales, new home sales reflect contract signings rather than closed transactions. Existing home sales, which are closed transactions, declined in October for the second straight month. the entire article

Jann Swanson
"The economist concluding that all housing activity has posted significant year-to-date gains and they expect continued improvement in activity in 2014, although at a varying pace. They also call the performance of home price measures so far in 2013 impressive."