MARKET RECAP

There is something about the calendar flip from December 31 to January 1 that imbues a “clean slate and a new start” mentality. For some ingrained psychological reason, a new year tends to rejuvenate optimism, even though it only represents a completed lap around the sun.

That said, we'll take optimism when we can get it. And no group is more primed for a shot of feel-good than homebuilders. More of them are starting to see the glass as half full, at least according to the NAHB housing market index, which rose two points to 17 this month after scraping bottom in December.

Fortunately, the latest numbers support the growing optimism. Housing starts increased 2.8% in January compared to December, posting at a seasonally adjusted annual rate of 591,000 units. We'll acknowledge that the extension of the federal homebuyers’ tax credit helped, but we'll also acknowledge continued low lending rates, renewed economic growth, and an improving employment outlook did their part.

Better pricing helped as well. Radar Logic's monthly Residential Property Index (RPX), a composite of 25 major US markets, increased 0.2% from November 17 to December 17, marking the first November-to-December increase since 2004. The increase might not sound like much, but it comes on top of a 1.5% increase from the October-to-November period.

We shouldn't see any backsliding either. Looking farther afield, First American CoreLogic projects prices will increase 2.7% by year's end, and if distressed sales are excluded, will increase 3.5%.

Meanwhile, mortgage rates continue to hold near record lows, at least according to surveys taken before the Federal Reserve announced it will raise the discount rate – the rate it lends to member banks – to 0.75%. Does this mean that mortgage rates will start rising? We can't say for sure, but we wouldn't discount it.