(MoneyWatch) When the Federal Reserve announced its latest round of bond buying ("QE3"), it noted that "The housing sector has shown some further signs of improvement, albeit from a depressed level." To help boost the nascent housing recovery and the weak jobs market, the central bankers have vowed to keep mortgage rates low for the foreseeable future.
This week, reports on new and pending home sales, as well as home prices should provide more clues as to the progress and pace of the nation's real estate recovery. If last week's news is any sign, the reports may be better than expected. Year-over-year figures, rather than the monthly numbers that often grab the headlines, provide a better lens through which to view housing. From a year ago, housing starts were up 29 percent; permits rose 24.5; existing home sales increased 9.3 percent; and listed inventory of existing homes decreased 18.2 percent.
Additionally, homeowners are slowly crawling out from under the weight of their massive obligations. CoreLogic reported that the number of homeowners in negative equity decreased in Q2 2012. Unfortunately, 10.8 million -- or 22.3 percent -- of all residential properties with a mortgage remain in negative equity and an additional 2.3 million borrowers had less than 5 percent equity in their homes. As prices continue to edge higher, these numbers will improve, but there is a long way to go: The Fed reported that the value of household real estate increased slightly in Q2 to $16.9 trillion, still $5.9 trillion below the peak.
The Fed is banking on small home price increases to provide additional positive benefits. The most direct consequence is that as chatter about the "horrible housing market" recedes, it can shore up the confidence of consumers, lenders and even appraisers, who have swung from over-enthusiasm during the bubble, to downright fear and pessimism during the recovery. This week, two readings on confidence are expected to show that consumers are feeling slightly better, at least for now.
-- DJIA: 13,579, down .1% on week, up 11.1% on year
-- S&P 500: 1,460, down 0.4% on week, up 16.1% on year
-- NASDAQ: 3,180, down 0.1% on week, up 22% on year
-- November Crude Oil: $92.89 down 6.2% on week
-- December Gold: $1,778 (highest close since Feb. 28)
-- AAA National Average Price for Gallon of Regular Gas: $3.82
THE WEEK AHEAD:
8:30 Chicago Fed activity Index
10:00 Dallas Fed Manufacturing Survey
9:00 Case-Shiller Home Price Index (consensus is for a 1.2% year-over-year increase in the 20 city index)
10:00 Consumer Confidence
ECB President Mario Draghi meets Germany's Angela Merkel in Brussels
7:00 MBA mortgage purchase applications index
10:00 New Home Sales
Bailout agreement between Spain and EU could be announced
8:30 Weekly jobless claims
8:30 Durable Goods Orders
8:30 GDP - Q2 final (previous reading = 1.7%)
10:00 Pending Home Sales
External audit of Spain's banking system released
8:30 Personal Income and Spending
9:45 Chicago PMI
9:55 Consumer Sentiment