Jim Haughey, Reed Construction Data Chief Economist reports that “The key markets drivers in the housing market remain mixed, keeping residential construction steady at a depressed level.

Home affordability is at a near record high level and still rising but home sales, remodeling and starts are limited by deep recession level buyer confidence and by widespread restraints on credit access. Nonetheless, pending home sales have improved significantly over the last four months and applications for purchase mortgages has risen strongly in the last two months.

Together with the huge fiscal stimulus included in the tax compromise plan likely to be enacted next week, the residential construction recovery should resume early in 2011……

The pace of foreclosure filings has slowed although the number of home in foreclosure proceedings will not ebb until late 2011. Sustained job growth has begun. The dip to only 39,000 new jobs in November is suspect. Trend job growth is about 100,000 per month and will rise steadily. The new federal fiscal stimulus will significantly boost job growth, raising both home affordability and homebuyer confidence.”

Another RCD Chief Economist Alex Carrick, reports that “U.S. total retail sales in November were +0.8% versus October and +7.7% compared with November of last year, according to the Census Bureau. This indicates underlying strength in consumer buying sentiment and allays many of the worries about the health of the recovery….

Overall, Statistics Canada’s leading indicator index in November was up 0.3% versus October, the same month-to-month percentage climb as in the period before. The increases in the latest two months are welcome after September’s drop of 0.2%. Canada’s third quarter GDP growth was only 1.0%. It fell below the U.S. level (+2.5%) for the first time since 2009’s third quarter…

In November, the index received a particular boost from the housing sector (+2.0%), as both existing home sales and new home starts stabilized after faltering in the middle months of 2010.

In another article by Carrick, he reports “Canada’s inflation rate hopped up 0.5 percentage points in October to stand at 2.4%, according to Statistics Canada. Half of the increase from September’s 1.9% figure was due to gasoline prices (+8.8% year over year).

The latest year-over-year change in the Consumer Price Index (CPI) was the highest since October 2008’s +2.6%.

The U.S., with a core inflation rate of only +0.6%, is worried about inflation being too low. The Federal Reserve plans to add $600 billion to the money supply to pump up prices. In many emerging nations with much faster growth rates than the U.S., the concern is the opposite – prices are increasing too rapidly. And that’s before the Fed conducts its quantitative easing....

Emerging nations justifiably believe that excess U.S. dollars will flood into their local economies and cause real estate and other asset prices to increase even faster. Their response has been a mix of higher bank reserve requirements, raising interest rates and capital inflow restrictions.

Canada now has to be added to the list of nations that will be monitoring inflation for a too-rapid advance. With third quarter growth in Canada weaker than in the U.S. (+1.0% annualized), the Bank of Canada will be uncomfortable with any thought of having to resume interest rate hikes."