You can barely see the move, but housing data has picked up over the last few months. Home construction is at four-year highs, according to the Commerce Department. What's more, construction permits were up 12% from August to September, a more than 90% increase over last year. The year-over-year increase was the greatest in two decades.
Ed Mills of FBR says housing was the big winner of the election, largely due to many of the plans put in place over the last four years. Because of this continuity, the Home Affordable Refinance Program (HARP) will stay in place as is, and Federal Reserve Chairman Ben Bernanke will remain for the balance of his term, which ends at the beginning of 2014 and possibly beyond.
"For GSE reform you're not going to have a huge push to dismantle it faster than probably necessary, so you're able to keep the current infrastructure in place which doesn't create the headline risk that some of the housing finance system is going to be disrupted again," says Mills in the attached clip.
The biggest driver of housing is a demographic factor that couldn't be stopped by all the economic policy missteps in the world: the arrival of the Echo Boomers. Also called Generation Y or the Millennials, the group born from the early 80's to the late 90's represent upwards of 95 million people in the U.S. — almost one-third of the U.S. population.
According to Mills, the average age of a first-time homeowner in the U.S. is now 34 years old. As clarity comes into the lending process for Fannie Mae and Freddie Mac, the average FICO to secure a cheap home loan will drop from the current 760. "You bring that down to 740, 720 to 700, all well qualified buyers, you'll see a massive amount of new individuals qualifying and getting into their new homes."
Mills isn't looking for anything other than incremental improvements through the first half of next year. For a housing recovery still in its early stages, a continuation of the nascent trend and a government that can just stay the course represent two major improvements over what we've seen for the last few years.