Standard & Poor's Deputy Chief Economist Beth Ann Bovino notes that Main Street seemed to ignore budget worries on Pennsylvania Avenue, with home purchases climbing higher in January. The S&P/Case-Shiller 20-city Home Price Index was up 6.8% from a year earlier in December. This is the seventh consecutive month of year-over-year price increases, and it comes after three years of year-over-year declines.
——————————————————————————————
Main Street seemed to ignore budget worries on Pennsylvania Avenue, with home purchases climbing higher in January. In January, U.S. new home sales jumped to their highest level in almost 5 years. That was even stronger than the better than expected sales reading for existing homes. And although median prices in January took back some of the gains recorded in December for both indicators, inventory of homes on the market remain lean. This should keep home prices climbing higher through 2013.
So what does the data mean?
We saw more good news from the housing sector. New home sales surged by nearly 16% to an annual rate of 437,000 units in January. That’s the strongest gain since July 2008. And while not as robust, existing home sales also edged up to 4.92 million units for the month, and a bit stronger than the 4.9 million expected by consensus. In both case, median prices in January took back some of the gains recorded in December. However, inventory of homes on the market remain lean, which we believe will provide more support to home prices in 2013.
Low inventories have helped support prices. The months’ supply of unsold existing homes is now at its lowest reading in seven year, while the supply of new homes on the market is near a 49-year low. Together with a better jobs market and extremely low interest rates, potential demand has been tapped, driving home prices higher. That further supports home prices, which was indicated in both December reports.
The S&P/Case-Shiller 20-city Home Price Index was also up 6.8% from a year earlier in December. This is the seventh consecutive year-over-year increase in prices, and it comes after three years of decline. Home prices are now down 30% from their July 2006 peak. We expect that home prices have finally stabilized.
It now seems likely that the 35% from the July 2006 peak-to-trough reading we saw in February and March may be the record low for this indicator after all. We expect prices to climb higher though next year. The overhang of unsold homes, particularly those in the process of foreclosure, will likely keep a lid on sharp gains in prices for some time, we have seen improvement.
Rising home prices have a positive knock-down effect to the overall economy. Since most people have their wealth tied up in their home, rising home prices make consumers more confident, more credit worthy and more willing to spend. In addition, potential home buyers who sat on the side-lines will want to get back in the market, on worries that if they wait too long, prices will climb higher and they’ll miss the boat. Finally, an improving housing market means more homes will be built. That means more jobs for construction workers and more business for home furnishings.
SP Capital IQ
S&P Capital IQ, a business line of the McGraw-Hill Companies (NYSE:MHP), is a leading provider of multi-asset class data, research and analytics to institutional investors, investment and commercial banks, investment advisors and wealth managers, corporations and universities around the world. We provide a broad suite of capabilities designed to help track performance, generate alpha, identify new... trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as Capital IQ, Global Credit Portal and MarketScope Advisor desktops; enterprise solutions such as S&P Securities Evaluations, Global Data Solutions , and Compustat; and research offerings including Leveraged Commentary & Data, Global Market Intelligence, and company and funds research, S&P Capital IQ sharpens financial intelligence into the wisdom today's investors need.
Trending Now
1
3
Read Next
Thought Leaders
Introducing the NEW Equities News: Transforming the world by investing in what matters most
Paula DeLaurentis
Mar 15, 2024
Economic
An opportunity for women in the clean-energy transition
Green Money
Mar 12, 2024
Economic
Making diversity in venture-capital funding a priority
Yinka Faleti
Mar 11, 2024
Environment
E-bike incentives are a costly way to cut carbon emissions, but they also promote health
The Conversation
Mar 7, 2024
3 dividend-paying health-care stocks that top analysts recommend
Benzinga
Mar 7, 2024
Economic
The true cost of food is far higher than what you spend at the grocery checkout
The Conversation
Mar 6, 2024
The Latest
Thought Leaders
Introducing the NEW Equities News: Transforming the world by investing in what matters most
Mar 15, 2024
Economic
An opportunity for women in the clean-energy transition
Mar 12, 2024
Economic
Making diversity in venture-capital funding a priority
Mar 11, 2024
Environment
E-bike incentives are a costly way to cut carbon emissions, but they also promote health
Mar 7, 2024