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Has The Fed Saved The Housing Market?

Tracey Ryniec

The Federal Reserve has kept interest rates at historic lows for several years in an effort to boost the housing market.

Today, the Commerce Department reported that building permits in November rose to their highest level in over 4 years, rising 3.6% to 899,000. The last time we had permits this high was in July 2008.

Housing starts fell 3% from October, however, to 861,000 but that followed three months worth of gains. It also came during the month of Hurricane Sandy where much of the East Coast was otherwise preoccupied.

Other indexes are also indicating strength in the housing market that hasn't been seen in years.

The American Institute of Architects (AIA) reported that the Architecture Billings Index for November moved up to 53.2 from 52.8 in October. A reading above 50 indicates strong demand for architectural services. The AIA also said that this was the strongest market conditions for architects since 2007, which was just before the housing market collapse.

Additionally, the National Association of Home Builders reported that the housing market index, which measures builders confidence about the single family home market, rose for the 8th consecutive month to 47 in December from 46 in November.

A reading under 50, however, still indicates that more homebuilders consider sales condition to be poor. But the trend is our friend with the homebuilders. Several of the individual segments, such as current sales expectations, rose above the magical 50 level.

Despite being under 50, this was still the highest reading since April 2006. Given the current momentum, it seems inevitable that the index will be over 50 in early 2013.

Did the Federal Reserve's aggressive actions save the housing market?

If the recovery is for real, how long should the Fed keep interest rates super low?

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