Amid speculation that the economic recovery in the US is gathering steam, housing segment remains a concern for the US Federal Reserve All eyes are on the housing sector, as it is the one that typically gives out an early signal for an interest rate hike in the US.

Mixed bag

The housing data report released last week paints a less rosy picture of the recovery, suggesting that the sluggishness may still persist. Housing starts and existing home sales have risen for the month of December.

Housing starts are up 4.41 per cent month-on-month (MoM) to 1.08 million and existing home sales are up 2.44 per cent MoM to 5.04 million in December after having fallen sharply by 6.3 per cent in November.

Also, the total increase in starts for the entire year 2014 is the highest since 2007.

That said, the pace of increase in housing starts has actually stagnated since November 2013.

It will be cause for true celebrations only if the starts increase at a pace of more than 1.1 million units.

On the new home sales front, building permits are increasing, though sales have been falling. The building permits trend remains up despite falling in the last two months.

Stagnant home sales

But US new home sales numbers were down for the second consecutive month in November last, falling 1.57 per cent to 438,000 units after a 2.2 per fall in October.

The main reasons for the stagnation in the US housing sector are high home prices and low employee wages. Although unemployment rate has come down to 5.6 per cent from the 2009 peak of 10 per cent, wages have not improved.

The average hourly earnings of employees dropped by 1.7 per cent in December after having averaged around 2 per cent for almost two years.

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