A stronger housing market is also underpinning the economy. Spending on all construction projects rose 0.9% in December to an $885 billion annual rate, the fastest since August 2009, Commerce Department figures showed on Feb. 1. Homebuilding outlays increased 2.2% to the highest level since November 2008.
The gains have generated more optimism among companies such as Bloomfield Hills, Michigan-based PulteGroup, the largest homebuilder by market value.
“The combination of incredibly low mortgage rates, continued increases in rental rates and especially rising home prices, and very low -- and likely to stay low -- inventory levels for housing lead us to believe that 2013 will be a better year for U.S. housing than 2012,” Chief Executive Officer Richard Dugas said on a Jan. 31 earnings call.
Realtors are also benefiting. Figures from the National Association of Realtors show 4.65 million previously owned homes were sold in 2012, up 9.2 percent from the previous year and the biggest increase since 2004.
The economy is also creating jobs. Employers added 157,000 workers in January after a revised 196,000 rise the prior month and a 247,000 surge in November, Labor Department data showed last week. Revisions added a total of 127,000 jobs in the last two months of 2012. A separate survey of households showed the jobless rate unexpectedly rose to 7.9% from 7.8%.
A hurdle for consumers is higher taxes. As part of its budget agreement on Jan. 1, Congress agreed to let the tax, used to pay for Social Security benefits, return to its 2010 level of 6.2% from 4.2%. That reduces the paycheck by about $83 a month for someone who earns $50,000.
Republican leaders in the House of Representatives are considering a stopgap measure to fund the government for the rest of the fiscal year that could reduce spending below $1 trillion. They are running through all possible scenarios as two fiscal deadlines near. Automatic spending cuts stemming from an impasse between the White House and Congress over deficit reduction take effect on March 1, and the continuing resolution funding U.S. government operations expires on March 27.